Tier 1 and Tier 2 diversity spend in the healthcare industry

Our recent blog post explored supplier diversity programs, why they’re important and why they are so challenging for the healthcare industry. This latest blog dives deeper into the topic and looks at:

•   The similarities and differences between Tier 1 and Tier 2 diversity spend.
•   What “good” looks like in terms of procurement dollars. 
•   How healthcare organizations can use their procurement strategies to foster robust networks of diverse suppliers.

Tier 1 and Tier 2 Diversity Spend Explained

The “tier” structure used by procurement teams to manage diversity spending strategies can be summarized as follows.

Tier 1 Diversity Spend

Tier 1 spend represents the total amount of procurement dollars that an organization spends directly with a certified diverse supplier.

As noted by supplier.io, large companies often contract with hundreds or even thousands of Tier 1 diverse suppliers. Anyone from the company that supplies vital IT hardware to the small business that landscapes the corporate campus could be a Tier 1 supplier.

Tier 2 Diversity Spend

Tier 2 spend represents the total amount of procurement dollars that an organization spends with a given supplier, who then sources the products and services from a certified diverse supplier.

Tier 2 relationships enable you to increase diversity spend while working with your existing suppliers, or with suppliers who may possess certain hard-to-come-by capabilities. In fact, Tier 2 suppliers are often included in the measurement of diversity spend, particularly for government contracts. In their 2021 State of Supplier Diversity Report, supplier.io notes that 54% of supplier diversity professionals track Tier 2 spend.

Procurement Trends and Diversity Spending

The amount of procurement dollars flowing through Tier 1 and Tier 2 diverse suppliers varies widely but it can be helpful to consider some benchmarks.

According to DiversityInc, in their assessment of diversity spending practices, the top companies allotted the following shares of their procurement dollars to Tier 1 diverse organizations in 2020:

•   8.57% spent on racially diverse supplies
•   5.86% spent on women-owned business
•   .43% on veteran-owned businesses
•   .10% each spent on LGBTQ and disability-owned businesses

Adding these figures, we see that the companies now leading the way in diverse spending practices spend roughly 15% of their procurement dollars with diverse suppliers and that figure is rising.

Fostering a Diverse Supplier Network in Healthcare

It can be challenging to create a reliable network of diverse suppliers. Progress is incremental and often measured in years. Drawing upon the findings of DiversityInc, here are four tips to get procurement and purchasing teams started.

1) Create a local network

Building a diverse supplier network requires that you cast a wide net, but it’s best to start fishing locally. Engage local advocacy groups to find out who the up-and-coming diverse supplier companies are in your region. Then, invite them for informal “getting to know you” sessions.

2) Utilize the national certifiers

Take advantage of the connections available through nationally recognized certification organizations. Some organizations to note include:

•   National Minority Supplier Development Council (NMSDC)
•   Women’s Business Enterprise National Council (WBENC)
•   INROADS
•   Disability:IN
•   National LGBT Chamber of Commerce (NGLCC)

3) Look at the social impact made

The whole point of diversity spending strategies is to create sustainable, quantifiable change in America’s underrepresented and underserved communities. As with any other procurement decision, due diligence is required. Ask to see metrics validating the “social value” that a diverse supplier delivers. This could take the form of jobs created, scholarships granted, small businesses incubated or something else.

4) Plan to develop partners over the long term

Diversity spending isn’t as simple as signing a contract and paying an invoice. Small diverse supplier organizations often need mentoring from the larger procuring organizations to thrive. The diverse supplier may benefit from marketing support, financial guidance, warm introductions to other prospective clients and so forth. This type of active partnership will enable mutual success over the long term.

Taylor Healthcare + Caracal: A Diverse Supplier Partnership

Taylor Healthcare and Caracal have the type of active partnership described in tip #4 above. Taylor Healthcare has been a trusted supplier to the healthcare industry for nearly 100 years and a partner to Caracal since 2005. Caracal, in turn, is a certified minority business enterprise and Tier 1 diversity spend supplier to the healthcare industry.

This partnership offers you an unmatched level of diversity spend flexibility. By sourcing from Taylor Healthcare, Caracal can deliver Taylor Healthcare’s products and services to you as qualified Tier 1 diversity spend including:

•   Labels and wristbands for the entire continuum of care, from admissions processes and patient charting to specialized pharmacy and lab labels.
•   Print management services that bring new levels of speed and cost-effectiveness to corporate print programs.
•   Branded apparel items and high-quality PPE products including gloves, gowns and masks.
•   Branding and marketing services ranging from corporate identity products and direct mail campaigns to sophisticated data analytics and digital marketing efforts.
•   Warehousing, kitting and distribution through a nationwide network of secure distribution centers.

Likewise, Taylor Healthcare can source products from Caracal to provide you with Tier 2 spending options. Simply utilize our user-friendly e-commerce platform to procure a wide range of healthcare products from Taylor Healthcare while Caracal handles the sourcing on the back end. The products available to us through Caracal include:

•   Nitrile exam gloves certified to resist harmful chemicals and pathogens.
•   Multi-layer lab coats and jackets that protect against fluids and chemicals.
•   Surgical masks, face shields and safety eyewear that combine comfort with high levels of protection.
•   Air filtration systems, disinfectant solutions, consumable paper products and more.

As noted in tip #3 above, you can be assured of the social value delivered through the Taylor Healthcare/Caracal partnership:

•   Caracal’s products and services are sourced directly from minority-owned and women-owned American businesses whenever possible, accelerating job growth in diverse communities.
•   Caracal reinvests its profits in things that will create jobs in American communities that need them most. For example, their warehouse in the Gratiot Town/Kettering neighborhood of Detroit hires people from the surrounding community as material handlers, quality control specialists, office managers and more.
•   Caracal co-founded the 1 Kind World brand with Outlook Nebraska, a nonprofit dedicated to the blind and visually impaired community. More than 70% of the 1 Kind World production workforce is blind or visually impaired and produces consumable paper products with 100% recycled content — items that are available exclusively from Caracal.
•   Caracal is actively fostering the next generation of diverse leaders. The Charles A. Roberts Scholarship, the Ann E. Lamb Scholarship and the Caracal Academy mentorship program are all focused on creating educational opportunities and building business acumen among diverse candidates from America’s Empowerment Zones. Likewise, their LYNX mentorship program is specifically designed to help other minority-owned businesses thrive.

Click here to learn more about Caracal and its diverse supplier relationship with Taylor Healthcare.