GUIDELINES FOR A
SECOND TIER INITIATIVE:
MAXIMIZING OPPORTUNITIES FOR ABORIGINAL
AND MINORITY-OWNED BUSINESSES
CANADIAN ABORIGINAL
and MINORITY SUPPLIER COUNCIL 2009
GUIDELINES FOR A
SECOND TIER INITIATIVE:
MAXIMIZING OPPORTUNITIES FOR ABORIGINAL
AND MINORITY-OWNED BUSINESSES
LETTER FROM THE
PRESIDENT OF CAMSC
econd Tier purchasing is the
among others to review issues related
vehicle used by prime contractors
to creating viable second tier programs
to extend inclusion in the supply
and make recommendations.
chain to smaller suppliers. Since many of
the Canadian Aboriginal and Minority
This document –adapted for Canada – is
Supplier Council - CAMSC - suppliers
the result of the cumulative experience
lack the capacity to deliver products/
and knowledge of task force members as
services directly to prime contractors, a
well as industry groups. CAMSC believes
tier one supplier is often the access point
that this document will help address
for Aboriginal and minority companies. A
many prevailing issues and provide
supplier diversity program is not optimized
guidelines for successful implementation
unless it includes a second tier initiative.
of a second tier program.
The
National
Minority
Supplier
Development Council with whom CAMSC
is affiliated, formed a task force comprised
of leading procurement officers at major
corporations including: Lockheed Martin;
PepsiCo; Raytheon; ExxonMobil; Kraft;
IBM;
Johnson
© 2009 Canadian Aboriginal and Minority Supplier Council
Controls
and
Chrysler
Orrin Benn
President, CAMSC
For more information visit our website at
www.CAMSC.ca
CONTENT
I.
Purpose and Scope ........................................................................ 03
II.
Definition of Terms ............................................................................ 05
III.
Business Case ................................................................................... 06
IV.
Goal Setting ...................................................................................... 11
V.
Measurement ................................................................................... 15
VI.
Reporting and Audit ...................................................................... 17
VII.
Program Evaluation ........................................................................ 19
VIII.
Industry Concerns and Considerations ........................................ 21
IX.
Recommendations ......................................................................... 23
X.
Frequently Asked Questions ........................................................... 25
XI.
Appendix and Forms ....................................................................... 26
GUIDELINES FOR A SECOND TIER INITIATIVE
1.1
PURPOSE
This initiative is intended to layout the guidelines
existing efforts aimed at increasing meaningful
minority supplier development programs (“Second
tier suppliers. In the US, federal regulations require
for implementing second tier aboriginal and
Tier Initiative”). In addition, it addresses some
of the frequently discussed second tier sourcing
concerns and issues of corporate members and
aboriginal and minority business enterprises.
The
Second Tier
Initiative
serves
as
an
enhancement to, and not as a replacement for,
1.2
opportunities for AMBEs to participate as first
that suppliers (doing business with the Federal
Government) are encouraged to engage aboriginal
and minority business enterprises in subcontracts
in all commodity categories with subcontracting
opportunities. This is the practice with private
industry as well, however; presently, there is no
such requirement in Canada.
SCOPE
These recommended guidelines address the
implementation
goal
issues
setting, business
(such
as
reporting,
case, incentives
and
measurements) involved with Second Tier supplier
diversity programs. The Guidelines will help
evolve supplier diversity programs into leading and
well-executed programs that maximize AMBE
opportunities. Consequently, these Guidelines
represent an approach and standard to assist
current and emerging Second Tier Initiatives in
their development process.
© 2009 Canadian Aboriginal and Minority Supplier Council
03
GUIDELINES FOR A SECOND TIER INITIATIVE
Defining the Supply Chain Tiers
Automotive Industry Illustration
Second Tier
Suppliers
04
First Tier
Suppliers
Prime
End User
Second Tier
Suppliers
First Tier
Suppliers
Prime
End User
Machine Parts
Engine
Aircraft
Customer /
Entity
© 2009 Canadian Aboriginal and Minority Supplier Council
II
DEFINITION OF TERMS
1. PRIME:
5. DOUBLE COUNTING IS DEFINED AS:
The corporation or entity that provides products
AMBE purchases that are captured as first-tier
user. The product or service is typically in its final
support of the same contract, relationship or the
and services to the customer, which is the end
value added configuration. In most instances, the
corporation is the lead entity in the value chain.
(See illustration left)
dollars by more than one major corporation in
Prime’s requirements. Additionally, AMBE to
AMBE spend should not be reported as secondtier dollars.
2. SECOND TIER:
6. QUALIFIED AMBE IS DEFINED AS:
A first tier supplier is a supplier that provides
An aboriginal or minority-owned business
for goods and services rendered directly by that
requirements of the Prime.
the products/services and invoices to the Prime
supplier. A second tier supplier is a supplier that
provides the products/services and invoices to the
that meets the certification and performance
7. CERTIFIED AMBE IS DEFINED AS:
first-tier supplier for goods and services rendered.
An aboriginal or minority-owned firm whose
3. DIRECT SECOND TIER
PURCHASES ARE DEFINED AS:
firm has been verified by CAMSC.
minority ownership, control and operation of the
Second Tier supplier products and services,
8. INTERNAL CUSTOMER:
requirements.
management, supplier diversity council or other
which CAN be identified in support of Prime’s
4. INDIRECT SECOND TIER
PURCHASES ARE DEFINED AS:
Products
and
services,
which
The Prime’s executive management, departmental
internal organizations and groups.
CANNOT
be identified in support of specific Prime
requirements (e.g. production support products
and services such as temporary staffing, and
facilities support services).
© 2009 Canadian Aboriginal and Minority Supplier Council
05
III
BUSINESS CASE – ADAPTED FOR CANADA
3.1 BACKGROUND AND
EVOLUTION
Second tier sourcing is a proposition, which was
began seeing the business proposition - supporting
The Federal Government had mandated that
that buy their products. By the mid-1990s, most
started by the United States Federal Government.
contracts greater than $500,000 must have Small
and Disadvantaged Business (SDB) requirements.
The requirements would ensure that small and
disadvantaged business participation occurs at
second tier levels. A few years later, corporations
minority suppliers creates minority consumers
corporations were undergoing strategic sourcing
initiatives and leveraging purchase volumes with
a concentrated group of suppliers. This leverage
enables the adoption of second tier sourcing
initiatives by corporations.
3.2 THE DRIVING RATIONALE
Second tier sourcing has been necessitated by the
B) Aboriginal and Minority business size and
A) Industry and value chain realities
Most aboriginal and minority businesses have size
Strategic sourcing demands increased consolidation
effectively competing against the majority of large
following factors:
and bundling of purchases to reduce transactionrelated costs and total system cost.
Across a
number of industries, corporations continue to
reduce their number of tier one suppliers, which
leads to more tier one suppliers engaging in
scale limitations
and scale limitations, which prevents them from
tier suppliers. In most situations where aboriginal
and minority suppliers are in tier one positions,
they tend to be in the indirect/non-production
categories.
Mergers and Acquisitions (M & A) activities
An analysis of value chains in a number of
continue to grow to meet their customer demands
minority businesses, the competitive entry points
to build competitive scale/size. Large suppliers
of taking more responsibility for larger portions of
the final product.
Another growing trend is to move towards
outsourcing of non-core activities and focus on core
areas, which enhance their market competitiveness.
industries indicates that for most aboriginal and
typically lie in the second and third tier positions
of the value chain. Ultimately, it would require
more opportunities at both the tier two and three
levels in order to increase aboriginal and minority
participation.
This further drives the reduction of tier one
suppliers.
06
© 2009 Canadian Aboriginal and Minority Supplier Council
GUIDELINES FOR A SECOND TIER INITIATIVE
C) Aboriginal and Minority economic power
and importance to Canada
With more than 5.2 million aboriginal and
visible-minority people, Canada now has the most
culturally diverse population among the world’s
industrialized nations. By 2017, aboriginals and
force for change within Canadian society.
Economically, these individuals represent an
enormous opportunity for businesses, not only as
consumers but as entrepreneurs, potential partners,
suppliers and employees, as well.
minorities are expected to make up one-quarter of
Governments and businesses will gain a significant
and Vancouver, they already account for more than
realign themselves with the increasing power
Canada’s population. In major cities like Toronto
one-third of the population.
For
Canadian
industries, governments
and
competitive advantage if they can successfully
of Canada’s visible-minority and aboriginal
populations.
suppliers, the rapidly growing economic power
D) Government encouragement
populations represents an enormous opportunity.
Visible-minority and aboriginal entrepreneurs in
their estimated buying power now exceeds $172
as partners, suppliers and employers. The federal
of the country’s aboriginal and visible minority
Based on average employment income, for example,
billion a year*. This figure will surpass $200 billion
within the next decade, as the proportion of visible
minorities and aboriginals increases within Canada.
By 2011, immigrants will account for 100% of
the growth in Canada’s labour market. Of these
immigrants, 70% will come from minority groups.
Among aboriginals, average individual income is
rising at twice the rate of the average income of
Canada’s population in general.
The growing economic influence of Canada’s
aboriginal
and
visible
minority
population
represents an enormous opportunity for Canadian
Canada compete within the Canadian economy
government encourages these businesses through a
variety of programs.
In 2008, for example, Canada’s Federal government
awarded 5,384 contracts, valued at $337 million,
to aboriginal businesses. The federal government
also administers several programs that encourage
the participation of aboriginal people in the
economy as entrepreneurs, suppliers, partners and
subcontractors. In 2008, the government provided
more than $37 million to support the creation and
expansion of viable businesses in Canada that are
owned and controlled by aboriginal people.**
businesses and governments. Not only does their
Governments at the federal, provincial and
of the consumer marketplace, their increasing
through programs that encourage diversity within
buying power qualify them as a significant segment
wealth
will
influence
developments
within
Canada’s economic and political landscape, as well.
Politically, more than 5.2 million visible-minority
and aboriginal individuals represent a powerful
© 2009 Canadian Aboriginal and Minority Supplier Council
municipal
levels
support
visible
minorities
the workforce. Canada now leads the world in
promoting the UNESCO Convention on the
Protection and Promotion of the Diversity of
Cultural Expressions.
07
GUIDELINES FOR A SECOND TIER INITIATIVE
With this support, Canada’s visible-minority
As Suppliers, these aboriginal and minority firms
influential role in the Canadian economy.
renewal. They are a source of innovation and
and aboriginal businesses play an increasingly
(It’s important to note that Canada does not
compile data to the same extent as the U.S. on
minority integration and its impact on society.
Industry Canada compiled an economic profile of
minority businesses in 2001, but the data is now
out of date. Further government action is needed
can play a key role in corporate supply-chain
flexibility. They offer access to innovative goods
and services, often by developing new market
niches or revitalizing existing ones. They drive
older businesses to become more efficient through
retooling and to respond more quickly to changes
in consumer demand.
to research, report and quantify the impact of
The increasing prosperity of Canada’s aboriginal
and society similar to research that the government
new dimension to the country’s economy and
minority businesses on the Canadian economy
currently conducts on aboriginal businesses.
E) Supplier development (size and scale)
Encouraged by opportunities within Canada’s
increasingly
diverse
consumer
marketplace,
aboriginal and minority entrepreneurs are starting
businesses in Canada at an annual rate that’s more
and visible-minority businesses brings a hopeful
represents a major opportunity for public and
private-sector organizations. Canada now needs a
comprehensive government policy that recognizes
the growing importance of aboriginal and minority
entrepreneurs and that will encourage their
sustained growth as integral segments of Canada’s
economy.
than 1.5 times higher than other entrepreneurs.
*Calculations based on Canada’s visible-minority
ownership in 7% of all Canadian small and
employment income of $43,000 per year and
In 2001 visible minorities accounted for majority
medium-sized businesses. Meanwhile, the number
of self-employed aboriginal Canadians has risen by
more than 30% over the last decade.
population of 4.3 million with an average
an aboriginal population of 1.2 million with an
employment income of $32,000 per year. Average
income in both groups is rising.
The sustained growth of these aggressive and
**Sources: Industry Canada estimates (www.ic.gc.
on Canada’s economy. As generators of wealth,
and Indian and Northern Affairs Canada (www.
innovative businesses will have a significant impact
aboriginal and visible-minority business report
revenues of more than $50 billion a year. As
employers, visible-minority companies provide jobs
ca/eic/site/ic1.nsf/eng/h_00667.html)
ainc-inac.gc.ca/ai/arp/es/0708/07-08dpr/eco-eng.
asp)
for more than 500,000 individuals.
08
© 2009 Canadian Aboriginal and Minority Supplier Council
GUIDELINES FOR A SECOND TIER INITIATIVE
3.3 BENEFITS OF SECOND TIER
SOURCING
Second tier sourcing benefits every participant
in the supply chain. The immediate benefit for
corporations (Primes), particularly those that
interact directly with the consumers/markets, is the
ability to grow aboriginal and minority sourcing
spending that reflects the industry and value chain
the few growth areas for most corporations. For
tier one corporations, the benefits accrue from
being able to provide customers with a critical
source of market differentiation and from meeting
regulatory/compliance requirements. In addition,
some other benefits include:
realities. These corporations are able to harness
• Gaining knowledge and channels to
consumers by using their supplier diversity
• Superior economics within their supply
the market potential of aboriginal and minority
programs for competitive benefits as follows:
1. Building positive brand and corporate
image.
2. Enhancing customer and brand loyalty.
3. Leveraging other sources of competitive
advantage when tied to specific corporate
assets and activities. An example is
leveraging
aboriginal
and
minority
suppliers to advance regulatory and
legislative agendas.
4. Superior cost economics from increased
competition in the supply chain (service,
quality, price, technology).
5. Gaining access to a rapidly growing market
of aboriginal and minority consumers.
6. Enhance corporate social responsibility
and sustainable development programs.
With increasing competition and limited market
growth opportunities, the aboriginal and minority
consumer and business segment remains one of
© 2009 Canadian Aboriginal and Minority Supplier Council
understand customer requirements
chain by using more nimble suppliers
• Enhanced brand and corporate image (cost
avoidance from negative public relations)
For aboriginal and minority businesses, it creates
opportunities at realistic points within the supply
chain. Aboriginal and minority businesses are now
exposed to realistic competitive pressures that they
can cope with, given their size, scale, and capital
access limitations. Other benefits are the increased
chances of longer-term viability and sustainability
of supplier diversity programs because of increased
likelihood of full supply chain participation in
aboriginal and minority sourcing programs. The
broader supply chain participation will be, the
higher the revenue of aboriginal and minority
owned businesses will be. Lastly, aboriginal and
minority suppliers that are comparable in cost,
quality, technology and service can enhance their
value proposition since they impact the Tier one’s
ability to meet customer aboriginal and minority
sourcing requirements.
09
GUIDELINES FOR A SECOND TIER INITIATIVE
Essential Processes For
Second Tier Diversity Sourcing
Program
Startup
Goals
Business Case
• Supplier Selection
• Commodity Selection
•Third Party Certification
• Education
• Communication
• Program Management
• Senior Management
Buy In
• Corporate Policy
• Incentives
Goal
Setting
External
Supplier
Diversity
Internal
Consensus
Building
Reporting
• Format
• Frequency
• Privacy Issues
• Multiple Tiers
10
Reporting
Compliance
• Measurement and Audit
• Incentives and Recognition
• Contract Clauses
• Upper Management
Reporting
• Manage
Expectations
© 2009 Canadian Aboriginal and Minority Supplier Council
IV
SUGGESTED APPROACH
AND PROCEDURE
1. SENIOR LEADERSHIP
COMMITMENT
The first step involves getting senior leadership and
6. SELECT INITIAL GROUP OF FIRST
TIER SUPPLIERS AND COMMODITY
CATEGORIES
Tier Initiative. This lays the foundation for all
requires effective selection of first tier suppliers
organizational commitment to creating a Second
Initiation of a successful second tier program
departments and functional areas to achieve initial
to begin the program. Maintenance and growth
buy-in for the program goals and objectives.
2. IDENTIFY NEED FOR CORPORATE
POLICY
Evaluate the corporate culture and determine if
supplier diversity as a corporate policy needs to be
incubated. A corporate policy helps to establish
specific goals that business units understand.
3. CREATE POLICY
Create a policy letter that outlines an organization’s
second tier strategy, which is consistent with
standard procurement practices and procedures.
4. FOCUS ON BUILDING “BUY-IN”
OF INTERNAL CUSTOMERS
Inform internal clients of an organization’s
intention to build upon a strong base. Communicate
to internal clients that their additional efforts are
expected in order to ensure that diverse businesses
are considered for all opportunities. In addition,
establish a delineation of required support efforts
from the supplier diversity function.
5. COMMUNICATE
Communicate strategy to internal customers, first
tier suppliers and AMBEs. Include basic second
tier education such as definitions, frequently asked
questions and sample correspondence.
© 2009 Canadian Aboriginal and Minority Supplier Council
of the program is also likely to require selection
of additional suppliers. While each company will
face unique opportunities and challenges both
within its industry and its particular supply chain,
several general principles have been found useful
in selecting suppliers: Startup program should
begin with only a few key strategic suppliers
instead of a broad implementation. These suppliers
are most likely to develop a positive partnership
approach and be willing to work through the initial
challenges and costs associated with a “learning
curve”. This approach develops momentum among
one’s own team and interest among competing
suppliers. To reduce start-up costs, initial program
suppliers that have experience with second tier
programs should be included. Typically, prospective
suppliers are often responsive to requests to
submit a second tier utilization plan as part of a
competitive bid. Once the initial group of first tier
suppliers and commodities are selected, convene
an orientation for internal customers that own the
relationships with these companies. Provide them
with an overview of the second tier program and
their roles in implementing the program. It is also
important to introduce them to the human and
technology resources that will assist in program
management. Discussions with first tier suppliers
are needed to establish what type of products or
services are included in the second tier program.
11
GUIDELINES FOR A SECOND TIER INITIATIVE
The commodity selection is done with a review of
8. EXPANDING THE SECOND TIER
PROGRAM
capabilities to provide product or service identified
When selecting the second wave of companies
current AMBE suppliers, to determine a match of
by first tier supplier.
7. MANAGE
Manage expectations of internal staff and first
tier suppliers. Goals and progress reports should
be periodically reported to the highest levels
(senior management) within the organizations. In
that will participate in the second tier program,
there may be a need to host a training program for
company representatives as this wave may not be
as familiar with supplier diversity as the first wave.
This training can be provided by CAMSC, an
outside consultant, or your supplier diversity team.
addition, goals should be made clear to the internal
staff, AMBEs and the first tier suppliers.
GOAL SETTING
4.2 DEFINE GOALS
The Prime’s goals should focus on attaining
maximum participation in selected commodity
categories in the beginning of the program. Goals
should be “phased in” during implementation with
• Determine the tools to be utilized in
tracking second tier procurement.
• Establish a timeline, which includes
internal education for sourcing managers,
buyers and supplier diversity team.
emphasis on education and training with first tier
• Include second tier sourcing as a part of
engineers, staffing resources, etc.) .
• Include second tier sourcing objectives as a
It is essential to work with supplier personnel and
• Be ready for exception request from first
and internal audience (e.g. buyers, sourcing managers,
internal staff to create internal reports that identify
progress and that are in a format that allows for
continuous improvement.
4.2.1 INTERNAL GOALS
The following steps are essential in establishing
internal goals for a second tier program.
• Communicate the desired objective for
establishing a second tier program.
• Establish a conference call or face to
face meeting with sourcing managers to
discuss established guidelines.
12
overall corporate policy.
mandatory contract clause.
tier suppliers.
4.3 DETERMINING CONSEQUENCES
FOR NOT REACHING GOALS
Careful
selection
of
suppliers, a
program
well integrated with the contract award and
administration process, regular reports, and
a positive partnership-like approach towards
incentives, are intended to keep serious shortfalls in
goal attainment to a minimum. Given the inherent
dynamic nature in both demand and supply,
however, goals can be missed. In most situations,
suppliers are strongly driven to meet mutually
© 2009 Canadian Aboriginal and Minority Supplier Council
GUIDELINES FOR A SECOND TIER INITIATIVE
established objectives such that it is very likely
to meet the original or revised goal.
that the missed goal is not a result of “bad faith”
• Meet with the supplier to reach an
missed goals be addressed and resolved quickly for
of action to meet the original or revised
or inattention. It is important, however, that such
two key reasons:
• Reaffirming or revising goals immediately
after missing objectives helps both parties
sustain a positive and realistic approach
towards objectives
• Second tier objectives are often a material
condition upon which a contract has been
awarded or renewed
A missed goal must be assessed within the context
of the supplier relationship and specific causes. In
some cases, a supplier will have a well-established
second tier program and a long record of meeting
its goals. That supplier may provide an advance
notice of the impending shortfall and its reasons.
In such a case, an informal partnership approach
may be appropriate where both parties discuss how
to get back on track.
However, defined steps should follow to address
such issues. These steps should include:
• Notification to the supplier (in form
described in the contract) that the goal has
been missed.
• A request that the supplier provide a reason
including an assessment of its ability to
reach the goal.
• The buyer and/or cross functional team
responsible for contract administration
should evaluate the supplier’s response and
determine if an amended goal should be
established and/or a detailed “remedial”
plan of action from the supplier is required
© 2009 Canadian Aboriginal and Minority Supplier Council
agreement on a revised goal and/or a plan
goal.
• If the supplier fails to provide an adequate
response, a notice of default should be prepared with legal counsel and discussed
with the team.
4.4 INCENTIVES AND
RECOGNITION
Incentives, rewards and recognition are essential in
ensuring continued commitment from all parties
involved with the second tier sourcing programs
and keeping the program momentum. Primes
should create an environment in which AMBEs
feel encouraged and eager to nominate their
buyers and supplier diversity officials to CAMSC
for consideration of “Advocates of the Year” and
“Buyer of the Year” awards. These forms of external
corporate recognition are approaches to reinforce
internal buy-in and continued commitment.
4.4.1 INCENTIVES FOR GOAL
ATTAINMENT FOR FIRST TIER
SUPPLIERS
Second Tier programs are successful when they
are well integrated into the contract award and
administration process. Attainment of second
tier utilization objectives should be key criteria
in supplier selection and assessment. Requiring
a second tier utilization plan in all proposals and
contracts may be a powerful incentive for many
suppliers. RFP and contract provisions, as powerful
as they may be in many situations, are not always
the best or most appropriate incentive. Generally,
successful second tier programs are developed
over time within the context of a long-term
13
GUIDELINES FOR A SECOND TIER INITIATIVE
relationship between the company and its first tier
Tied into supplier diversity spending objectives are
an important basis for discussions, other incentives
also must be met and are occasionally in conflict.
suppliers. While contract provisions may provide
are often equally important.
Some examples are as follows:
• Suppliers should be asked to submit
regular progress reports, which include
a comparison of actual results to targets.
Many suppliers are eager to meet or make
progress toward such specific targets.
Consequently, incentives must also be created to
recognize dual efforts of increasing first and second
tier spending; enhance performance, and sustain
effective supplier diversity programs.
Below are some key considerations:
• In addition to routine written reports,
Setting and reporting on goals are important elements
second-tier opportunities as part of all
instances, numbers alone do not indicate progress or
suppliers should be asked to address
performance reviews/updates provided to
the company.
• Supplier Report Cards should be developed
(if not already in place) or amended to
include second-tier evaluations.
in second tier supplier diversity programs. In many
growth, or the effort that is being put into the success
of these programs. Looking beyond the numbers can
reveal good, and not so good, intentions in meeting
statistical goals in second tier minority programs.
• A Supplier of the Year program should
In some instances, the first tier supplier has a better track
requirement for all applicable awards.
These first tier suppliers generally have an existing top
include a successful second tier program as
• In addition to formal programs and
procedures, a positive partnership approach
including assistance with appropriate
supplier referrals and assessments may
be appropriate within the context of an
established strategic partnership.
4.4.2 INCENTIVES FOR BUYERS
(INTERNAL AND FIRST TIER)
The responsibility of a buyer includes not only
creating opportunities for diverse suppliers, but also
spending on behalf of the corporation as a whole.
14
often the opposing cost savings objectives, which
record in diversity supplier contracting than the Prime.
rate supplier diversity program, which is well respected
in the industry. When this situation exists, the Prime
should work with that first tier supplier to enhance its
own program. In all other situations, the Prime should
establish measurement criteria that ensure the same
consideration of aboriginal and minority suppliers
similar to situations when the Prime is conducting first
tier sourcing with aboriginal and minority suppliers.
The following are some specific activities that should be
measured in determining the effectiveness of a Second
Tier Minority Supplier Program. These activities are
classified as internal and external activities.
© 2009 Canadian Aboriginal and Minority Supplier Council
V
INTERNAL ACTIVITIES
Many of the activities associated with building a successful aboriginal
and minority business program go beyond merely posting higher diversity
supplier utilization numbers. These activities demonstrate the supplier’s
commitment to build a successful program and to meet the customer’s
diversity supplier utilization goals. The required internal activities are as
follows:
5.1.1 CREATE NEW RELATIONSHIPS
First tier supplier’s objective is to establish
relationships with new aboriginal and minority
suppliers when they receive large contracts with
AMBE goals. The desired approach is to look for
existing AMBEs which already conduct business
within one’s industry. In some instances the
potential new AMBEs are suppliers that were
providing products or services directly to the
customer prior to the second tier arrangement.
These AMBEs can be found through CAMSC
and working with the Prime.
5.1.2 STATISTICS
Statistical data should be provided to identify
specific activities that may support and enhance
the continued growth of the second tier program.
5.1.3 RECORD-KEEPING
PRACTICES
The manner in which companies present similar
data often varies. The Prime should determine
the first tier supplier’s utilization of compatible
recordkeeping practices. If the record keeping
practices are not similar, disparities or areas of
potential misunderstanding should be resolved at
the outset of the reporting period.
5.1.4 VALIDATION
Information should be provided by the first tier
supplier that will validate the statistical reporting
© 2009 Canadian Aboriginal and Minority Supplier Council
elements such as records showing outreach
activities, lists of new aboriginal and minority
suppliers, aboriginal and minority sup¬pliers
receiving contracts that were traditionally awarded
to non-aboriginal and minority companies,
documented new activities that were undertaken
to expand or improve the existing aboriginal and
minority supplier program, and evidence that the
records/record keeping process is audited.
5.1.5 DEVELOPMENT ACTIVITY
The first tier supplier should demonstrate its
intent to continuously improve the aboriginal
and minority supplier program. The Prime must
demonstrate a willingness to assist the first tier
supplier in this activity by instituting mentoring
programs for AMBEs as an example.
5.1.6 SHARE AMBE INFORMATION
In many instances, the first tier supplier may
not have sufficient information about qualified
aboriginal and minority suppliers’ performance in
the contract area. In all practical cases, the Prime
should provide the first tier supplier with a list
of their aboriginal and minority suppliers with
performance history on the contract. Although
there is no requirement or intent for the customer
to direct the first tier supplier to use specific
aboriginal and minority suppliers, sharing the
information will increase the opportunities for
aboriginal and minority suppliers.
15
GUIDELINES FOR A SECOND TIER INITIATIVE
5.1.7 PLANNED AMBE INCLUSION
The first tier supplier should demonstrate its
intent to meet supplier diversity participation
goals by identifying specific areas where it intends
to utilize aboriginal and minority suppliers. In
some instances it may be appropriate to name
specific diversity suppliers to be included in the
contract performance.
5.1.8 JOINT PUBLICATION
OUTREACH
When the opportunity presents itself, or can
be created, the Prime and the first tier supplier
should jointly provide information on contracting
opportunities, conduct aboriginal and minority
supplier development workshops, and share
information at trade fairs and seminars.
5.1.9 AMBE DEVELOPMENT
When the products or services necessary to
support an outsourced contract are difficult to
obtain from aboriginal and minority suppliers,
the first tier supplier should establish formal or
informal mentoring relationships with diversity
suppliers. Such relationships demonstrate a good
faith effort to develop aboriginal and minority
suppliers to meet AMBE goals.
5.1.10 INCLUDING AMBEs IN
SOLICITATIONS
First tier suppliers should demonstrate their
commitment to the aboriginal and minority
supplier goals by continuing to solicit capable
AMBEs for all practical opportunities. For
example, failure of one or two AMBEs to respond
to a request for quote or proposal should not be
sufficient reason to eliminate AMBEs from the
request for proposal lists.
5.1.11 PURCHASES
Purchase dollars, purchase transactions and
contract performance are elements that should
be measured. Product and service areas in which
AMBEs are utilized should also be measured. In
16
many instances, a first tier supplier has utilized
AMBEs only in limited areas when there are
clearly opportunities in other product and/or
service areas.
5.1.12 SPECIAL OUTREACH
Some outreach activities are performed by people
outside the traditional purchasing organization
and can be instrumental in aboriginal and
minority suppliers receiving opportunities that
otherwise might not be available to them. Such
special outreach activities include engineering
and program manager participation in supplier
days and seminars.
5.2 EXTERNAL
Measuring specific contributions of the second
tier supplier can be utilized to meet the first tier
supplier goals. Measuring these contributions can
also be an indication of the first tier supplier’s
commitment to their overall supplier diversity
program.
5.2.1 DIRECT CONTRIBUTIONS
Identifying products and services provided by
the second tier supplier in direct support of the
customer contract is the standard of measurement
to determine performance toward the goals.
5.2.2 INDIRECT CONTRIBUTIONS
It is advisable to measure dollars spent with
AMBEs on indirect products and/or services
when appropriate allocation methods are utilized.
Note: this is an area that requires “up-front”
agreement with the prime and the first tier
supplier for record-keeping practices. CAMSC
formula should be used for allocation of indirect
spend dollars.
5.2.3 AMBE STRATEGIC ALLIANCES
AMBEs should be encouraged to partner and
collaborate with each other to obtain progressively
larger contracts (business that otherwise might be
too large for one AMBE).
© 2009 Canadian Aboriginal and Minority Supplier Council
VI
REPORTING PROCESS
The overall objective is to encourage the development of sustainable
opportunities for AMBEs to participate in the Prime procurement
processes where it makes economic sense to do so. Hence, all
parties, including the Prime, first tier suppliers, second tier suppliers and
advocacy groups must nurture Second Tier Initiatives. This nurturing
includes realistic expectations during early phases of implementation
with the stated intention of working towards an optimal reporting
capability. The Second Tier Initiatives of a “mature” program utilize a
more stringent standard that includes only those purchases reported by
first tier suppliers from AMBEs that have certification of their AMBE status
from CAMSC or the NMSDC.
The first tier suppliers’ reporting capabilities will vary. It is unacceptable
for the first tier supplier to cite the inability to provide AMBE procurement
results in a useful format, without citing a plan including a time frame.
Likewise, it is unsuitable for the Prime to require a reporting frequency
that first tier suppliers are not staffed to process.
6.1.1 REPORTING FREQUENCY AND
FORMAT
• Quarterly first tier supplier reports to the
Actual frequency of reporting second tier results
• Quarterly internal reports to executive
will be governed by:
Prime
management (Prime)
• Annual reports to external audiences where
• The requirement of the Prime
• The Prime’s systems and capabilities in place to
support the reporting requirement
• The capability of first tier suppliers to provide
AMBE procurement results in a meaningful
content and format
required
6.1.2 SUPPLIER
When first tier suppliers lack the ability to
internally track their AMBE purchases, the Primes
are to work with such suppliers to:
Once the supplier’s ability to report in a useful
• Define the frequency of reporting actual
reporting to the Prime is to be determined. The
• Create a plan of action to address capability gaps
format is in place, the required frequency of
Prime may establish different reporting frequencies
to its internal and external audiences.
executed second tier reporting requires:
© 2009 Canadian Aboriginal and Minority Supplier Council
Well-
results, content and format requirements
• Establish a mutually-agreed timeline for
supplier results reporting with defined
interim reporting deliverables
17
GUIDELINES FOR A SECOND TIER INITIATIVE
6.1.3 REPORTING CLASSIFICATION
Guidelines for second tier reporting should include,
at a minimum, AMBE purchases by:
• Validate data reported to the Prime
• Verify
accuracy
of
measurements
provided to senior management during
Measurement reviews
• Aboriginal and Minority
• Product/service classification (NAIC Code)
• CAMSC certifications
6.1.4 SUPPLIER EVALUATION
• Verify problem areas identified in reviews
regarding measurement, tracking and
expired certificates
management attention
which
received
The Prime’s initiatives include AMBE procurement
• Determine if appropriate actions are
in the Prime’s evaluation of the supplier (i.e.,
• Determine and review documentation
performance and evaluation will be based on the
reporting, certification procedures, business
by the first tier supplier as a measurement criterion
taken to address identified concerns
Supplier Report, Scorecard). The supplier’s actual
process and communication, external
specific goals mutually established between the
conduct guidelines and web site security
Prime and first tier supplier as stated in the Goal
Setting Section.
6.2.2 AUDIT APPROACH
• Determine if there is an applicable
6.2 AUDIT
corporate policy in place
To ensure year-to-year accuracy of reported
internal data, it is recommended that a policy,
which requires bi-annual audit, be put in place.
The audit needs to be modeled similar to a
• Determine standard of review for audit
• See whether there is a Procurement Policy
book, which determines an applicable
review
financial or supplier quality audit. The process
• Determine the timeframe for the audit
(internal to the Prime’s organization) and the
• Determine frequency of internal audit
should be conducted by an independent body
• Determine the procedure to be utilized
data should be tracked and reported to the
• Determine plan of action following the
an audit, the possible grades should only be
• Determine consequences of failed internal
Supplier Diversity Management.
Similar to
Satisfactory or Unsatisfactory. If questions arise
regarding accuracy of data, consider a third party
audit
audit
auditor. In using a third party auditor, program
The overall recommendation in the area of second
be determined, paid, and what nondisclosure
a corporation must have sufficient resources in
guidelines must clearly indicate how costs will
tier program accuracy and verification is that
agreement needs to be signed.
place to manage the program, including monitor
6.2.1 AUDIT OBJECTIVES
communicate with program participants.
• Determine if diverse supplier certificates
are maintained by the Supplier Diversity Department
18
program performance, verify for accuracy and
A
single full-time individual can barely manage a
functional first tier program and most certainly
cannot add a second tier program to their
© 2009 Canadian Aboriginal and Minority Supplier Council
GUIDELINES FOR A SECOND TIER INITIATIVE
responsibilities without additional resources. It
review the information but fail to communicate,
an action plan documenting the requirements for
Unfortunately, many reporting firms interpret this
is recommended that program managers develop
adequate resources to manage the process.
The increase in the number of second tier
purchasing programs has created some concerns
positively or negatively, the findings of their review.
lack of scrutiny and/or communication as a signal
to pay less attention to the accuracy of the content,
resulting in careless preparation.
from various stakeholders as to the accuracy and
2. INCONSISTENCY
concerns include the following:
their first tier suppliers. On the surface, this may
credibility of the reporting process.
Specific
1. INADEQUATE FEEDBACK
Many customers fail to review the information
submitted by first tier suppliers. Other companies
Many customers accept modified reports from
seem trivial. However, inconsistent reporting
makes it difficult to maintain a uniform review
and verification procedure.
PROGRAM EVALUATION
Key Considerations
Supplier
Feedback
Report
Format
Documentation
Backup
Third Party
Certification
© 2009 Canadian Aboriginal and Minority Supplier Council
• Review information provided by first tier suppliers
• Provide timely feedback on accuracy, format and
areas for improvement
• Discourage the submittal of non-confirming or modified reports
• Limit ability to maintain uniform review and cross supplier
analysis
• Require the submission of documentation that supports
reported aboriginal and minority sourcing dollars
• Ensure a balance between documentation detail and onerous
reporting
• Clear understanding of what third party certification is
accepted in reporting aboriginal and minority spend
19
GUIDELINES FOR A SECOND TIER INITIATIVE
3. LACK OF THIRD PARTY
CERTIFICATION
first tier firms use total contract value as the
The issue of certification remains a major topic of
method distorts the reporting totals and should
basis for their second tier reporting. This latter
discussion. Third Party certification is essential
be disallowed.
failure to exclude non-certified firms from
6. POOR RELATIONSHIPS
verify the contract dollars awarded to bona fide
tier supplier and the AMBE does not meet the
to the credibility of the reporting process. The
the second tier process makes it impossible to
The quality of the relationships between the first
aboriginal and minority businesses.
expectations of the Prime.
4. INADEQUATE DOCUMENTATION
CAMSC currently recognizes 12 industry
In an effort to “streamline” the second tier
groups. Each of these groups has a different
require documentation to support the dollars
distinctions fall into three areas:
reporting process, some corporations do not
way of procuring goods and services. The major
contained in first tier reports. This lack of detail
• Consumer focused companies (B2C)
makes it impossible to verify the accuracy of the
reports.
5. BASIS FOR INCONSISTENT
REPORTING
The recommended method for reporting second
tier is total cash payments to AMBEs. Some
20
• Business-to-Business focused companies
(B2C)
• Government focused companies (B2C)
In many respects, the government focused
companies’ profiles track those of business-tobusiness focused companies.
© 2009 Canadian Aboriginal and Minority Supplier Council
VIII COST OF DEVELOPING A
SECOND TIER PROGRAM
Development cost should be considered from two primary respects:
• Program policy, procedures and management
• Systems tracking and support
Policies, procedures and management flow best from well-defined and implemented first tier programs.
However companies that are just developing supplier diversity programs can construct their programs
to flow through multiple tiers at the outset. Cost factors will be impacted by the staffing support to
address second and lower tier issues.
Developing systems to track and support second and lower tier aboriginal and minority business
spending may be more cost effective when designed at the outset of a new supplier diversity program
initiative. Major considerations should include:
• Supplier designations
• Integration with payment and supply base management systems
• Multiple field sort and report capabilities
Costs will vary depending on the intricacies of the system. However, the cost of not developing an
appropriate tracking and support system may be higher.
8.2 PROGRAM MANAGEMENT
A standard reporting system that includes metrics,
The Supplier Diversity Office should retain
report forms, reporting schedule and other
diversity initiatives and activity.
the contract signing with a predetermined launch
responsibility for the breadth of the supplier
requirements should be made available prior to
second and lower tier supplier diversity efforts
date.
sourcing decision makers within the supply chain
Maintaining a good relationship with existing
tier aboriginal and minority business spending
relationship with new AMBEs is critical in second
discussions and strategies for early involvement
suppliers are impacted by their knowledge of the
buyers are critical to this aspect of second and
other activities should be designed to provide as
However,
require full participation and ownership of the
organization. The success of second and lower
AMBEs and developing a good working
initiatives is heavily dependent on upfront
and lower tier programs. Performance levels of all
with first tier suppliers.
ultimate customer’s requirements. Outreach and
lower tier spend programs.
© 2009 Canadian Aboriginal and Minority Supplier Council
Sourcing managers/
much information about second and lower tier
21
GUIDELINES FOR A SECOND TIER INITIATIVE
programs as possible. AMBEs will require this
8.5 THE ROLE OF CAMSC INDUSTRY
GROUPS
and lower tier suppliers.
To
information in order to be successful as second
8.3 THE ROLE OF THE AMBEs
AMBEs must try to familiarize themselves with
customers’ information as much as possible.
Therefore
they
should
attend
conferences,
business opportunity fairs and symposiums to
learn about industry outsourcing activities and
the associated requirements.
8.4 EDUCATION ON SECOND AND
LOWER TIERED PROGRAMS
The CAMSC office is the focal point for second
and lower tier guidelines and activities. Many
AMBEs will have difficulty transitioning from
first to lower tier supplier relationships as more
work is bundled and outsourced. Others will
be frustrated in the lack of opportunity with
the
extent
possible,
industry
groups
should agree on reporting forms, formats and
requirements.
This documentation should be
included in the appendix of the Second/Lower
Tier Guideline Document. Additional industryspecific information could include:
• Industry conference on second and lower
tier
• Specific industry publications
• URLs for specific industry resources and
information
• Annual business opportunity
development briefings
Corporations that fall outside of the current
industry groups can provide information on their
industries directly to CAMSC.
their major targeted corporations, particularly
after initially obtaining certification through the
CAMSC Network. Printed as well as on-line
information should be made available to include:
• General information on second and lower
tier programs
• Tutorials for corporations and AMBEs
• Maximum use of FAQ on-line at
CAMSC web site
• Second and lower tier as a major source of
procurement opportunities
• Business model for targeted industries
22
© 2009 Canadian Aboriginal and Minority Supplier Council
IX
PRACTICES
9.1.1 PROGRAM REVIEW AND
PROCEDURES
9.2 MANAGING TRANSITIONS AND
RELATIONSHIPS
It is recommended that the procedure manual for
It takes an effort to establish and maintain a
on Program Review. This review would be an
tier suppliers. The major dilemma is how to gain
the second tier program should include a section
extension of the procedures in place to review
the first tier program results. In addition, it is
important to include this review as part of the
supplier evaluation/contract compliance practices.
9.1.2 CONSISTENT
COMMUNICATIONS
Consistent communications with participating
companies is essential to maintain the credibility
of the second tier program and the integrity of
the data. When first tier companies know that
a representative of the Prime will review their
reports, the quality of the reporting will improve.
Written procedures must include the monitoring,
feedback process and frequencies.
9.1.3 AMBE FEEDBACK
The quality of the relationship between first tier
successful relationship between first and second
the full support of the participating first tier
supplier. To ensure full support from all parties,
the customer should bring the appropriate
parties together to clearly define the objectives
and purpose of such an initiative and convey the
importance of a successful relationship between
the parties. In addition, there are several steps
that are important to take with each of these
supplier types.
9.2.1 FIRST TIER SUPPLIERS’
RESPONSIBILITIES
• Must be formally introduced to an
organization’s Aboriginal and Minority
Business Program and its objectives.
• Individual targets must be specifically
communicated and put in contract form
if a contract is used.
suppliers and AMBEs must also be verified. It
• The interval of reporting and timing of
implemented for surveying AMBEs to ascertain
• The supplier should be introduced to
that the relationship is productive for all parties.
• If there are specific support needs or
is recommended that a systematic process be
that they are, in fact, receiving contract awards and
review should be clearly stated.
CAMSC and advised to join.
training required by the supplier, these
needs should be addressed as soon as
possible.
• Initial meetings between first and second
tier suppliers should be facilitated by
company buyers and/or the AMBE
director whenever possible.
© 2009 Canadian Aboriginal and Minority Supplier Council
23
GUIDELINES FOR A SECOND TIER INITIATIVE
9.2.2 SECOND TIER
RESPONSIBILITIES
9.2.3 UNIFORM REPORTING
FORMAT
• If previously a direct supplier, the
corporation must clearly explain the
rationale involved in the decision that
requires them to go to second tier.
Industry groups should create a taskforce to
review the possibility to establish a uniform
reporting format.
• The corporation must reinforce the
level of commitment in maintaining
the relationship and the integrity of the
AMBE initiative.
• At the same time, the corporation
must reinforce the need to fulfill all
requirements of production and/or service
to the first tier supplier.
• Negotiations of any sub-contracting
particulars
should
be
left
to
the
representatives of the first and second tier
parties.
• The AMBE office should always be
available and alert to management issues,
before 24
they escalate into major crises.
© 2009 Canadian Aboriginal and Minority Supplier Council
X
FREQUENTLY ASKED QUESTIONS
Q. How do I find aboriginal and minority suppliers?
A. You can attend trade fairs, survey current supply base, join CAMSC, and go to Matchmaker events
held by the Primes.
Q. What is the difference between direct and indirect aboriginal and
minority dollars?
A. Direct dollars are defined as the dollar amount paid to a certified aboriginal or minority company for
a product or service that is directly related to a Prime. For instance, you may produce a metal stamping,
which will be sold to a Prime after being painted by a minority company. The cost of painting for the
stamping product is directly related to the Prime and is thereby classified as direct dollars and receives
100% credit.
Indirect dollars are defined as the dollar amount paid to a certified minority company for a product or
service that is not directly related to any particular customer of a specific Prime. This is usually the case
with Maintenance, Repair, Operations (MRO) items and construc¬tion suppliers. These dollars may be
prorated for each customer, based on the percentage of the revenue.
Q. Should second tier aboriginal and minority spending goal be based on
sales or purchases?
A. Our purchases from you are your sales. This dollar value is traceable and quantifiable. Your purchases
of products and services may be 30 to 80 % of annual revenues; no two companies are the same.
When first tier suppliers are asked to meet or exceed aboriginal and minority goals based on sales, the
requirement becomes a catalyst for your company to treat this initiative strategically, not simply as a
matter of “tactical compliance.”
Q. Will our company information be handled? Will our privacy be protected?
A. The information submitted by the aboriginal and minority firms will be treated with the utmost
confidentiality. The privacy of the individual MBE will not be compromised.
© 2009 Canadian Aboriginal and Minority Supplier Council
25
GUIDELINES FOR A SECOND TIER INITIATIVE
Q. How does Second Tier Initiative benefit our company?
A. If you are a Prime corporation, which interacts directly with the consumers/markets, the immediate
benefit is the ability to harness the market potential of minority consumers by using supplier diversity
programs for competitive benefits such as building positive brand and corporate image, enhancing
customer and brand loyalty, and gaining access to a rapidly growing market of minority consumers.
If you are a tier one corporation, the benefits accrue from being able to provide customers with a critical
source of market differentiation and fulfilling corporate social responsibility requirements. You will also
benefit from gaining knowledge and channels to understand customer requirements and from superior
economics within their supply chain by using more agile and innovative suppliers.
Q. How is “Double Counting” defined?
A. It is defined as AMBE purchases that are captured as first-tier dollars by more than one major
corporation in support of the same contract, relationship or the Prime’s requirements. AMBEs that are
on the contract should not report second-tier dollars.
Q. What would be Primes’ main goals?
A. Primes should focus on attaining maximum participation in selected commodity categories in the
beginning of the program. During the implementation of the program, Primes should emphasize
education and training with first tier and internal audiences such as buyers, sourcing managers and
engineers.
XI APPENDIX AND FORMS
11.1 RFP CONTRACT CLAUSE
Seller is required to submit to Prime on a quarterly basis an accounting of minority Tier II supplier
payments made. Submission is to be made via the diversity supplier development web site. The following
items are needed to successfully complete submission:
Supplier identification (S-ID)
Tier II name(s)
Tier II payments (direct and/or indirect)
Aboriginal and Minority certification
26
© 2009 Canadian Aboriginal and Minority Supplier Council
GUIDELINES FOR A SECOND TIER INITIATIVE
Reporting period
Supplier is required to submit and/or maintain a plan for aboriginal and minority business enterprise
participation upon awarding of Business. The plan should detail how supplier will meet Prime’s minority
sourcing requirements and include, but not be limited to:
Aboriginal and Minority joint ventures
Subcontractors/sub-suppliers
Current and/or projected minority sourcing activity
Aboriginal and Minority supplier class code/classification
Projected annual volume of business (AVOB)
11.2 SENIOR MANAGEMENT COMMUNICATIONS TO FIRST TIER SUPPLIER
(Date):
To: All First Tier Suppliers
From: John Doe Executive Vice President, Supply Chain and Procurement
Subject: Minority Sourcing Second Tier Goals
The growth and development of aboriginal and minority business enterprises (AMBE) is a commitment
that we regard as crucial to our continued success. Our mutual future depends on capturing and retaining
the loyalty of the growing aboriginal and minority market. Support from all of our first tier suppliers is
necessary for us to achieve its goals and objectives.
The goal for all first tier suppliers has been established for 2009 calendar year. Effective immediately, each
first tier supplier is required to source 8% of our awarded business with AMBEs. In recognition of the
importance of this goal, its achievement is factored into your supplier rating and established as one of
the requirements for attaining a supplier award. Please contact your respective Buyer or diversity supplier
representative if your company needs further assistance.
© 2009 Canadian Aboriginal and Minority Supplier Council
27
GUIDELINES FOR A SECOND TIER INITIATIVE
11.3 SAMPLE SUPPLIER NOTIFICATION LETTER
(DATE)
Dear Prime Supplier:
Enclosed you will find a copy of the __________ Aboriginal and Minority Business Development
(AMBD) Second Tier Subcontracting Plan. Under this plan, select First-Tier suppliers are asked to
establish a AMBD procurement target equal to a minimum of 5% of your sales to ________. In certain
instances, this target may be higher (depending on the product/service being bought).
Your AMBD results are important measurements of your relationship with _______. The results of
your AMBD subcontracting performance will be measured on your Supplier Performance Report
card. Therefore, we ask that you submit a report on a quarterly basis summarizing your minority sub-
contracting efforts in relation to your __________ contract. These reports should be submitted to your
__________ “buyer” within 15 days following the close of the calendar quarter (i.e., April 15, July 15,
October 15, and January 15). See Report Section.
__________ is committed to increasing direct and indirect spending with aboriginal and minority-
owned businesses. In keeping with this commitment, we strongly encourage our prime (First Tier) suppliers to support these businesses, particularly in conjunction with type of contracts or purchase orders.
Naturally, these companies should meet your quality standards and be price competitive.
Questions concerning the Second Tier Subcontracting Plan should be referred to ________________,
AMBD Specialist, ______________.
Sincerely, (signature)
28
© 2009 Canadian Aboriginal and Minority Supplier Council
GUIDELINES FOR A SECOND TIER INITIATIVE
11.4 SAMPLE LETTER OF NOTIFICATION FOR INTRODUCTION OF SECOND TIER
PROGRAM TO INTERNAL BUYERS
To: All Buyers From: Vice President, Procurement or Supplier Diversity Manager
Subject: Introduction of Second Tier Sourcing Program
(Company Name) has developed a new initiative for the growth of the aboriginal and minority-owned
suppliers to the corporation. A goal has been established for those suppliers who provide products and
services to (Company Name) that states a new mandatory requirement to source business with minor-
ity suppliers. This new initiative will be known as the Second Tier Sourcing Program (or your company’s
designated initiative title).
Aboriginal and Minority-owned businesses are one of the fastest growing segments in the nation. The
second tier process is a tool used by many other firms throughout the country to create economic revi-
talization in the communities in which they do business. More importantly, the second tier process is a
methodology to attract and capture new market share while enhancing business opportunities for these
suppliers.
We will roll out the process to a small group of our suppliers as a pilot group which are listed on the at-
tached listing. The suppliers that have been selected are expected to appoint a supplier diversity champion
who will be responsible for tracking expenditures to aboriginal and minority-owned businesses. The
initial goal to be established for each member of the test group is X% of the sales revenue to our com-
pany. Expenditures will be reported on a (monthly, quarterly, bi-annual) basis utilizing a (web-based data
collection, formatted spreadsheet or paper reports) process.
The development of a strong and viable supplier diversity program is a commitment that our firm regards
as crucial to the growth of future market share for the company. The support of your area is necessary for
(Company Name) to achieve its goals and objectives.
For further information regarding the Second Tier Sourcing Program, please contact __________, the
manager of corporate supplier diversity at (xxx) xxx-xxxx. Look for notification in the next few weeks
regarding training that will be provided to give detailed information regarding this new business strategy.
© 2009 Canadian Aboriginal and Minority Supplier Council
29