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By John T. Lau
Global Crossings, Xerox, Tyco, and of course, Enron Corporation, have all felt the consequences of poor accounting logic and policies. Recently WorldCom, plagued by accounting scandal and profit erosion, filed the largest bankruptcy claim in United States history. These corporate failures, which have cost investors billions of dollars and caused markets to tumble from shaken confidence, are all punctuated by unfit methods for gathering and reporting data.
The backlash? The private sector, the government, and the wronged public are searching for the culpable party at which to point a collective finger of guilt. In my opinion, we will not find satisfactorily guilty antagonists because these transgressions are not ultimately the doings of corrupt persons, but of corrupt practices. We of an analytical nature might call these practices Fuzzy Logic and Fuzzy Math.
Fuzzy Logic is an inadequate process for gathering and processing data. Fuzzy Math is the fruit of Fuzzy Logic – data that is unreliable because of the way it was gathered. Unfortunately, both practices have tended to promulgate with implicit consent.
In this climate of greater public scrutiny, businesses must expect to be held accountable for all public information. The question is not only the obvious, "Who's next to fall?" but also, more elusively, "By what information and what sources might they be judged?" I believe the criteria should include conscious verification of the reporting of corporate dollars being spent with diversity vendors.
Inadequate tools and Fuzzy Logic have made the task of gathering accurate information on diversity spending nearly impossible. Using a stand-alone desktop application to accomplish an enterprise-wide business function creates inevitable siloing of data. As a result, companies' diversity spend figures are being illegitimately augmented by the double and triple counting of vendors who meet more than one criterion.
Until the recent scrutiny of business practices, there was little incentive for businesses to check the veracity of their data. Consequently, these Fuzzy Math practices have systemically weakened the diversity supplier's position; there is a variance of billions of dollars in contracts nationwide that never reaches diverse vendors, despite the statistics touted by corporations.
With enterprise-wide solutions like DivTRAK, corporations can easily centralize vendor information, eliminate redundancies, automate reporting for an infinite variety of vendor types and certification statuses, and, perhaps most importantly, stand behind the accuracy of their reporting.
It is time that businesses examine their reporting as seriously as the wary public now scrutinizes it. In order to meet the demands of investors and truly commit to the economic power of diversity suppliers, business leaders need to track reported diversity supplier information clearly and accurately – Fuzzy Math and Fuzzy Logic no more!
John T. Lau, president of Applied Information Services, is a leader in the field of diversity supply chain management. Early this year, John was honored as one of "The Fifty Influential Minorities in Business" by the Minority Business and Professionals Network.
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The Company
Johnson Controls, Inc. is a global market leader in automotive systems and facility management and control. In the automotive market, it is a major supplier of seating, interior systems, and batteries. For non-residential facilities, Johnson Controls provides building control systems and services, energy management, and integrated facility management.
Johnson Controls has also distinguished itself as a great supporter of supply chain diversity with more than 1,100 diversity vendors in their supply chain. They have received numerous awards for their commitment to supplier diversity, including the 2002 Corporation of the Year Award from the Tennessee Minority Supplier Development Council and six consecutive Corporation of the Year Awards from the Michigan Minority Business Development Council.
The Challenge
Johnson Controls needed a way to get information on supplier capabilities to purchasing managers and internal decision-makers. They also needed to track each division's buying patterns - what was being purchased from which suppliers.
Yet, there was no centralization of data. Despite a homegrown, Web-based system that tracked supplier diversity, each department within Johnson Controls was separate and decision-makers were spread across the company and the country. This decentralization meant that there was no way to get data for the entire company diversity spend, only for individual departments, and even then, they were often subject to human error.
"We have buyers at many different facilities," explains Reggie Layton, director of diversity business development for Johnson Controls. "If they waited for me to give them minority supplier candidates, they would never reach their goals." It was time for an upgrade of the system.
The Solution
After careful evaluation, Johnson Controls found that DivTRAK was the only product to offer both the breadth of services required by the company and the automated financial analysis capabilities they so critically needed. DivTRAK not only automates tracking of diversity spending by business unit, but also gives Johnson Controls the ability to analyze that information across the entire company. Additionally, Johnson Controls is now able to provide a level of detail to its executive team and external customers not before available. For instance, the company can now distinguish between MBE categories and determine which dollars are spent within each specific category.
The Benefits
DivTRAK has centralized Johnson Controls' supplier diversity information, creating greater efficiency, less error, faster distribution of supplier information, and greater accountability both for suppliers and purchasers. Suppliers now compete on a level playing field, judged on the same data categories as each of their competitors.
In addition, Johnson Controls has seen a tremendous increase in efficiency. "Before [DivTRAK] it took us 2-3 days to produce customer reports. With DivTRAK, we can do the same report in under an hour," says Layton. With an estimated 50-70 reports per year to be completed, Johnson Controls is saving the equivalent of at least 20 workweeks of time! As a result, two full-time employees have been freed up from data collection to focus on more strategic issues.
"Comparing our old system to DivTRAK is like comparing night and day," says Layton. "The software itself has exceeded our expectations."
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The only solution that Manages, Measures, and Markets™ supplier diversity sets a new standard in integration & functionality.
In DivTRAK 3.0 we've optimized our impressive architecture to meet evolving industry standards and the emergent needs of supplier diversity programs. DivTRAK is a true enterprise-wide solution, integrating seamlessly into your existing diversity site and legacy databases.
- Total Web Access. Creates greater accessibility for you and your vendors because it is a wholly Web-based application.
- Ease of Integration. Architected to seamlessly fit within "best of breed" corporate information technology frameworks utilizing any combination of Oracle, Microsoft, IBM, Sun, Oracle, BEA, and other platforms.
- Future-Oriented. Compliant with current J2EE standards, guaranteeing that today's software investment won't become outmoded tomorrow.
- Security. Utilizes 128-bit RSA encryption to ensure that your data transmission is confidential.
- Direct Supplier Registration. Diverse vendors can go directly to your existing supplier diversity site to register for your program.
- User Interface Engine (UIE). Fields may be customized for ease of use and the interface can be altered to reflect your company's identity.
- DivFAX™ Capabilities. Qualifying suppliers can fax certification documents, which are automatically stored in the vendor's records for quick reference.
- Appliedinfo Hosting. A fully redundant network combined with round-the-clock systems management creates an eminently reliable, cost-effective environment for operations.
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