Daryl Hodnett delivered this informative webinar for the Procurement Summit organization on the development of diverse suppliers.

1. EXECUTIVE SUMMARY
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Confidential not for redistribution. Licensed to members for their internal company use only subject to the Member Agreement.
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OVERVIEW
Supplier Diversity in the Procurement
Process
by Daryl Hodnett, director, supplier diversity and small business development,
University of Missouri System
Explore how you can expand diversity in your supplier pool helping minority-
owned businesses venture with majority businesses.
DARYL HODNETT, formerly of Procter & Gamble Co., serves as director of supplier diversity and
small business development for the University of Missouri System, which serves 77,000 students
on four campuses.
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Diversity “will not generate and dictate that customers and
consumers will choose you, but it is a tool ultimately in the
marketing toolbox that, if used effectively and used correctly,
can help you win in the market place.”
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The move toward supplier diversity began with the Big 3 automakers, who were looking for
ways to build consumer loyalty and, yes, meet government requirements.
E X E C U T I V E S U M M A R Y
F O R M E M B E R S

2. EXECUTIVE SUMMARY
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Confidential not for redistribution. Licensed to members for their internal company use only subject to the Member Agreement.
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America is becoming increasingly diverse. By 2040, it is expected half of Americans will belong
to a minority – California and Texas are already there – due to birth rates and immigration.
Pressure from advocacy groups is no reason to increase diversity. You do it because it is right for
your business, not because you were forced to do it. If you do things the right way, you will keep
advocacy groups away.
In business-to-business, diversity is all about pleasing your customer. Major customers ask
suppliers to create supplier diversity efforts and many suppliers report diversity spending
because it provides a competitive advantage.
In the education setting, it’s about putting “butts in seats” to ensure the future. The nation’s
population shift toward diversity is certain to change the makeup of student bodies. On campuses,
diversity it is a long-term proposition. Hodnett is his university and other schools across the
country how to realize their diversity goals.
Hodnett holds up a Procter & Gamble project as an examples of a successful diversity effort.
P&G was expanding its liquid laundry detergent plant in Pineville, La., to help its plant in Lima,
Ohio, meet demand stemming from increased sales. The expansion created a need for bottles and

3. EXECUTIVE SUMMARY
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p. 3
corrugated boxes. The company decided on a bottle supplier, Plastipak, and then set out to find a
new-to-the-world minority business enterprise to fill its need for what would become a $20
million to $30 million annual order for boxes.
P&G had set a goal of delivering $1.5 billion in spending to minority- and women-owned
business by 2005 and had been working on meeting that goal since 2002. Each business unit and
category of spend had goals and timetables in place.
The new corrugated cardboard supplier became part of that effort in 2004.
Company leaders had been hearing complaints about the lack of jobs and opportunities for
Alexandria residents, who lived just down the road from Pineville, and that supported the
decision to find an MBE.
P&G selected 5 majority-owned businesses – four of whom were already doing business with the
company -- to bid for the box work, but made it clear that if one of them won the bid, a joint
venture with an MBE would be necessary. P&G was aware that this would be a new process for
many of the six and offered to help them locate potential partners or plant sites in Alexandria.
One minority business, Integrated Packaging, with which P&G had already been doing business,
was also asked to bid. It seemed to be the only MBE around that could perform the contract on
its own.
Then P&G identified other MBEs potentially suitable for ventures and referred them to the
majority-owned companies. “The idea was we wanted to do some initial matchmaking.”

4. EXECUTIVE SUMMARY
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All entities got a chance to meet each other face-to-face in April 2004 during a walk-through of
the Lima plant. Georgia Pacific, one of the majority bidders, attended with Integrated Packaging.
Four months after the walk-through, the bids arrived. Four of the majority-owned companies
invited to bid were not heard from. Georgia Pacific did a joint bid with Integrated Packaging also
bid on its own, something IPC did not do. Pratt Industries of Australia, the only one of the six
potential bidders that had not worked with P&G before, bid a joint venture with MBE Signature
Packaging, which was led by a man who had at one time worked for Pratt.
The MBE bids came in at an initial premium of more than 12 percent.
The decision was made the company’s MBE goals and its need to face the community issues in
Alexandria outweighed the money it would leave on the table when it paid the premium. P&G
would pursue the Georgia Pacific/IPC venture.
P&G asked for a final bid that made better financial sense and senior leaders from all three
companies mat in October 2004 at the NMSDC Conference in Chicago to discuss the path
forward.
P&G leaders reviewed all the business it was doing with Georgia Pacific and IPC and asked
them to submit a broader bid, based on some give-backs on other business and some potential
extended contracts. Here’s where it all ended up:

5. EXECUTIVE SUMMARY
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IPC leased a facility in Alexandria and hired 50 people, 40 of whom were black and most of
whom lived in town. Although, the business was a start-up, risk was low because of the role of
Georgia Pacific, which was P&G’s largest corrugated cardboard supplier and could train IPC.
Some thoughts:

6. EXECUTIVE SUMMARY
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p. 6
 You shouldn’t pay a premium in these deals, but, as with other suppliers you bring on,
you might want to do some investment spending.
 A supplier diversity goal is not a quota. If you miss it, you move on.
 Your current suppliers may provide the best solution, but you won’t know if you don’t try
to expand your supplier base.
 You will always be able to find a minority- or woman-owned business, even if it means
helping to create it yourself.
Meanwhile, back at the university:
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The executive summary above was written by staff from watching the presentation and many other ideas
were presented. Members may watch the full presentation if wished by logging in.