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The Rich Flavor of Diversity

Author(s):

Cathy Kutch
Cathy Kutch is director, supplier relations and diversity at Kellogg Company in Battle Creek, Michigan.

March 2011, Inside Supply Management^® Vol. 22, No. 1, page 32

Sustainability: Responsible Supply Management
Kellogg Company's supply management team is dedicated to working closely with diverse suppliers, adding layers of value to the company and the community.

Kellogg Company supports diverse suppliers to provide better opportunities for companies owned by minorities and women and, simultaneously, help to strengthen the communities where we live and work. Our history of supplier diversity dates back to the early 1980s, when we began a partnership with minority-owned Mays Chemical Company. Today, our supplier diversity program includes suppliers from more than 400 U.S. companies owned by minorities, women and disabled veterans.

Our supply management approach is very hands-on for such a large company, and it's been mutually beneficial for us and our diverse suppliers. We see many success stories that have grown from these supplier relationships.

For example, I met with Angela Cauley and her husband, Ian Blount, in 2003, when they told me they wanted to start their own blending company for spices and seasonings. At the time, Cauley enjoyed a successful sales career with Mays Chemical. "Be sure you really think this through," I advised them. "There are a lot of blending companies out there. What would you do to differentiate yourself from the competition?"

Seven years later, they have indeed figured out how to differentiate themselves. Their company specializes in innovative and nutritional blends, developed by a well-qualified core staff that includes food science, culinary arts, marketing, process engineering, agribusiness and applied economics professionals. As a result of their hard work, Coalescence Custom Blending and Packaging Specialists, based in Indianapolis, is a minority-owned business that employs 42 people and holds contracts with Kellogg, Wendy's and Tyson Foods, among others. Perhaps most impressive was Coalescence's growth between 2008 and 2009, when the company's gross sales exploded from US$2.5 million to $21.5 million — a revenue jump of 760 percent.

The company's success was the result of timing, opportunity and hard work. When Coalescence was in its infancy, members of Kellogg's procurement team went to Indianapolis and met with Cauley and the rest of her leadership team to talk about their processes, financials and procedures — and showed them exactly how they could be a more viable and beneficial supplier to Kellogg.

And we've kept the lines of communication going after our visit. Any time Coalescence has questions or needs advice, members of our supply management team are available to lend their expertise. Today, Coalescence continues to be one of many successful diverse suppliers to Kellogg, and we are proud to be the company's largest customer.

The Customer's Appetite for Diversity

Another reason why supplier diversity is important to Kellogg is because it's important to our customers. Many of our customers have supplier diversity programs that require diversity throughout their supply chains, including second-tier suppliers. Like us, these companies understand the strategic value that different types of suppliers within a supply chain can provide.

We regularly engage with our customers by providing updates on our supplier diversity program, including the status of our spend with women- and minority-owned suppliers. We also recently met face-to-face with two of our largest customers and one of our major suppliers about enhancing our diversity efforts. As a result, we're connecting some of our suppliers with their suppliers in hopes they'll be able to form new partnerships.

But the bottom-line reason for supplier diversity is this: Kellogg believes it is important to buy from people who buy from us. Our consumers are as diverse as the retailers that sell our products. To understand their needs, and to succeed in the marketplace, it is important to reflect diversity in our supplier base and in everything we do.

To achieve diversity in our supply chain, Kellogg partners with many types of suppliers, big and small. And each supplier adds value to our supply chain through different strategies and values.

For instance, Baldwin-Richardson Foods, headquartered in Frankfort, Illinois, used some of its capital, combined with capital from Kellogg, to design what's called the "K Line" in its facility in Macedon, New York. This line was built specifically to create fruit fillings for our Nutri-Grain and Kashi bars. As part of this ongoing partnership, Baldwin-Richardson regularly sends representatives to our research and development facility to test and tailor its fillings to better align with our needs, improve our products and, where possible, achieve cost savings.

Partnerships with diverse suppliers such as Baldwin-Richardson and Coalescence open a pipeline of ideas, solutions and better ways of doing things — which, in turn, helps our company grow.

But it's not just about procurement and growth. From the top down, our company believes it's important to work with our suppliers to help them understand our supply management strategy and improve their own procurement strategies. We want to ensure that our diverse suppliers remain viable. So if a supplier calls with an issue or question, we take the extra time to work through it with them. It's all about keeping these suppliers competitive and leveling the playing field.

We've also invested our dollars back into minority-owned companies in recent years by making it possible for their leadership to participate in various educational opportunities. In one example, we awarded a scholarship to Linzie Venegas, a business unit manager at Ideal Shield, a Detroit-based handrail, guardrail and bollard cover company. Venegas' father is the owner of the company, and she is positioned to eventually take over the business, so it made sense that she attend the Tuck School of Business' Minority Business Executive program last summer. During this program, Venegas received guidance on her income and cash flow statements and created operational and value proposition mission statements. She brought those mission statements back to her company and held a workshop to discuss and apply them to her business.

Partnering with small businesses in this way — and helping them become more effective and efficient — simultaneously supports their development while continuing to strengthen Kellogg's supply chain.

Seeing Beyond the Challenges to a Healthy Future

As with many business initiatives, there have been bumps in the road that challenge us as we grow our diverse supplier network.

Working with a variety of niche suppliers isn't as commonplace as it used to be, due in part to most large suppliers' ability to bundle products and offer a one-stop-shop approach. As a result, it's become more difficult — and important — to help grow diverse suppliers appropriately and ensure they remain competitive.

Despite this challenge, we've seen tremendous growth in our supplier diversity program throughout the last decade. In 2009, we spent more than $400 million on goods and services from minority- and women-owned businesses, up from $49 million in 1999.

So, what does the future hold for supplier diversity? When I first started with Kellogg, we were a $6 billion company; today, Kellogg has sales of nearly $13 billion. As our business needs continue to evolve, we're sourcing from larger companies to handle more business from a cost savings standpoint. Factors such as food safety, top-line growth and cost reductions within our company are also more important to the supply management team than ever.

As a result, we need our diverse companies to grow and evolve with us. And we recognize that this, too, requires nurturing and support. That's why we work to help equip our diverse suppliers with the tools they need — ideas, strategies, solutions, resources and performance measurement capabilities — to stay competitive and strong. We also recognize the population, and ultimately the demographics of our consumer base, is becoming more diverse, and that ultimately influences how we need to think about supplier diversity.

But above all, we want our supplier diversity program to be credible. We want to make a difference. We want to be able to look at individuals like Cauley and Blount and know our business and our support made an impact — and that we helped them be successful.

For more information, send an e-mail to author@ism.ws.

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