2014 NMSDC Supplier Diversity Tier II Strategy Discussion

November, 2014

Largest

30Million guests

2nd

retailer in the United States

Discount

Target…Who we are

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Our Guests

Medianage4

$65kMedian annual income

Guests Love Target for its Newness, Product Assortment

SavvyValue-

well-

Value& its

educated

& conscious

0

USD

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Our Brand

“Expect More. Pay Less.”CompetitiveValue at every transaction

Amazing

at Unthinkable Prices

PricesDesigners

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INDIRECTTier 2

Supplier

1st Tier Supplier

▪ A supplier that invoices the customer/corporate buyer for products and services rendered directly

▪ Total spend with certified MBE’s that directly supports business with Target

▪ Spend which has been prorated based on supplier sales and/or percentage of a supplier's total revenue from Target

The Definition of Tier 1 and Tier 2 Suppliers

DIRECTTier 2 Supplier

Tier 1 Supplier reports diverse spend to Target quarterly via a web-base reporting tool

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Why Should Target have a Tier II Strategy?

Tier II makes sense…

1. Target is at the top of the supply chain and can’t always work directly with diverse suppliers given our requirements

2. Opportunity for Target to build scale with capable but smaller diverse suppliers so as to develop them into a direct/tier I supplier in the future

3. Target is responsible, ethical, and community and education focused organization and expanding opportunities to drive greater economic development aligns with our values

4. Internal partners (D&I) participate in surveys that require Supplier Diversity and Tier II strategies as a key component for success

5. Corporations with best in class Supplier Diversity strategies have a strong Tier II presence

6. It’s the right thing to do!

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Promoting Tier II Supplier Engagement

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Process map for starting a Tier II relationship

• Get familiar with big category suppliers

• Create a threshold for engagement

• Confirm if supplier is currently registered and not reporting

• Leverage spend data to tell your story (diverse vs. non-diverse spend)

• Share top suppliers in each category

• Get contact information from PM

• Kick off meeting with client and supplier

• Assess feasibility

• Are they bought in?

• Are they ready?

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Tier II Contract Language

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Best Practices: Diversity Language

Example 1 (Basic): To the extent you are able to identify diverse suppliers. Supplier agrees to participate in the Supplier Diversity Tier 2 reporting program (the “Diverse Supplier Program”). On a quarterly basis, the client shall electronically request from Supplier information regarding the diversity classifications of its services providers spend related to the business with the client.

Example 2 (Moderate): “Your company is strongly encouraged to use its best efforts to give certified MBEs the maximum practicable opportunity to participate in the subcontracts it awards, consistent with the efficient performance of any contract awarded by us. As a result of this RFP, certified MBEs who respond will be viewed as providing added value to their proposal.” (thought-provoking)

Example 3 (Aggressive): “The target goal for utilization of MBEs under this contract is set at ____%. If the Seller's documented past performance utilizing MBEs exceeds this goal; such documentation should be submitted in response to this solicitation.” (aggressive)

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MBE’s, are you ready to work with a large retailer

Some things to think about…

Your % of business with potential client should not to exceed 20% of annual sales.

What is the risk to your company if the clients business is lost?

Amount of insurance you will need to cover the business, liability?

Distribution challenges, do you have the technology needed?

Can you operate with lower profit margins?

Scope and scalability (capacity) of your company?

Innovations, Business & Marketing Plan?

Understanding of the Corporation’s business, processes and practices?

Ability to provide high quality, cost competitive goods or services?

Compliance with all necessary regulations and or standards?

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Corporate SD professionals are you ready to establish a Tier II strategy

Some things to think about…

Must have a well established Tier I strategy before you consider creating a Tier II strategy

Executive level buy-in from your procurement partners is critical

Technology is a must to track and report Tier II Spending

Reporting frequency must be realistic for yourself and the prime supplier

Consistent communication and training for prime suppliers

Measure success by setting goals

Must be truly committed to MBE development for this strategy to be successful

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Questions