Kellogg's Recipe for Supplier's Success
reprinted Diversity Executive January/February 2013, Cathy Kutch.

When consumers go to a supermarket, they have a lot of choices. In addition to choosing products because of their unique flavors, design or price points, consumers vote — consciously or unconsciously — for a product based on what they know about the company that makes it. Often, it comes down to a company’s approach to diversity.

Many consumers want to purchase products from companies that represent themselves, and they are increasingly sophisticated. Some even ask if the company invites and encourages diverse companies into its supplier base, if there is a visibly diverse workforce, if the company is visible at events diverse consumers attend and supports organizations they belong to, and if members of minority groups are represented in its advertising.

More than 30 years ago, in large part to be compliant, transparent and to satisfy customer requests, Kellogg Co. decided to focus on diversity and inclusion in all of its operations. Now it markets its food, snacks and beverages to people in more than 180 countries.

Kellogg executives decided that going forward they would have to listen to and understand the opinions, expectations and needs of diverse customers and consumers, and respond with products and brands. Executives realized fostering diversity and inclusion within the workforce and supplier base was critical.

Kellogg approaches diversity and inclusion the same as any other business-critical initiative. Senior executives serve on the Executive Diversity and Inclusion Council, chaired by President and CEO John Bryant. Diversity and inclusion is also tied to compensation programs, and the council has established metrics that track progress. Employees are held accountable for these metrics during performance reviews because of a belief that they can’t change what isn’t measured.

“Kellogg was an early adopter of diversity in the workplace,” said Ann Drake, chief executive officer for DSC Logistics and Supply Chain Management, a longtime Kellogg supplier. “They were on the leading edge of this trend, back in the early 1990s. Since then, they have created a real culture of diversity, where people are rewarded for their inclusion efforts.”

In August, Kellogg published its annual diversity and inclusion report detailing the company’s ongoing commitment to building a diverse workforce and a supplier base that is reflective of consumers and the communities where it conducts business.

In the report Bryant wrote: “Fostering diversity within our workforce and our supplier base is not just the right thing to do; it’s critical for helping us achieve our strategic vision.”

Trickle-Down Theory
In 1999, Kellogg spent $49 million with diverse suppliers. Today, the Kellogg Supplier Diversity Program benefits more than 200 U.S. businesses owned by members of diverse groups and is on track to surpass its goal of $370 million.

Kellogg also collaborated with suppliers on everything from business ideas to resources to procurement dollars. For example, Kellogg sent suppliers to training, sponsored executive networking events and hosted a recognition event, all with the purpose of investing back in the suppliers.

“Kellogg has been very supportive in sponsoring members of our senior management team to attend executive training programs at the Kellogg School of Management at Northwestern University,” said Angela Cauley, chief executive officer of Coalescence, a custom blending and packaging company, one of the black- and female-owned businesses that have partnered with Kellogg. “Kellogg helped put Coalescence on the map by awarding us a lucrative contract with their Morningstar Farms brand of meat substitutes,” she said. “We saw a significant increase in revenue, we were able to hire 16 additional associates and our company has had a considerable positive economic impact on our local community.”

When it comes to embracing diversity within a company and its supplier base, the trickle-down theory is alive and well at Kellogg. Consider Jami Hennrich. Her company, Hesco Inc., based in Watertown, S.D., supplies organic wheat for use in Kellogg products. Hennrich said since signing a supplier agreement with Kellogg in 2004, her company has secured contracts with at least eight other companies.

“We’re a small, woman-owned business, so purchasing agents often don’t believe we’re capable of supplying product in the kind of volume big companies need,” she said. “But because of our performance with Kellogg, and because we delivered on our promises year after year, we can prove to other companies that Hesco lives up to, and even exceeds, expectations.” Hennrich said Kellogg contracts have given her access to more working capital for her company which, in turn, allowed her to upgrade equipment and hire five additional workers. “As a direct result of the business we were doing for Kellogg, we built our plant in Nebraska,”

Hennrich said. “The added capacity and logistical advantage of this plant’s location enabled us to serve other customers as well.” Cauley’s company has seen similar success. “Our contract with Kellogg has afforded us enough manufacturing through-put that we’ve been able to secure other customers,” she said. “And being a supplier to Kellogg has made us attractive to other major Fortune 1000 companies.” For Kellogg, the goal of inclusion and diversity goes beyond its own operations. The company challenges suppliers to look for diversity within their businesses. Suppliers are asked to complete evaluations on a quarterly basis that provide details about their suppliers, giving insight into the company’s second-tier spending. For Kellogg, the goal of inclusion and diversity goes beyond its own operations. The company challenges its suppliers to look for diversity within their businesses.

“They encourage us to use diversity in our supplier content, even down to second- and third-tier suppliers,” said John Banks, chief executive officer of Motor Shop Electrical Construction, a longtime supplier to Kellogg. “Their customers are pushing them, and they’re pushing us.” In every business setting, female- and minority-owned businesses are there, with their foot in the door ready to be considered along with everyone else. “All we’re looking for is a chance,” Banks said. “It’s one thing to have a chance and fail. It’s another to not even have a chance.” According to Banks, once a minority-owned company such as his is selected for a contract — from Kellogg or any other company — it’s then incumbent to deliver. “You want every customer to feel as if they can’t survive without you,” he said.

For DSC Logistics’ Drake, that part is relatively easy. “To be able to work with somebody on the other side of the table, to form one team with them — that’s our competitive advantage,” she said. “It’s a critical component of our value proposition to our customers.”

Hennrich agreed. “As a small company, we’re nimble enough to push through production changes, on a daily basis if needed,” she said. “That kind of flexibility makes us extremely valuable to a manufacturer like Kellogg, and other companies as well.”

Not Just About Awards
External parties have taken notice of Kellogg’s investment in supplier diversity.

In April, Kellogg was named among the Top 50 Companies for Diversity 2012 from DiversityInc. The company also received recognition in the summer from Hispanic- Business magazine as one of its Top 60 Companies for Hispanics, and Black Enterprise identified the company among its 40 Best Companies for Diversity.

Kellogg’s Bryant was recognized in 2011 with the CEO Leadership Circle of Excellence Award from the Minority Business Development Agency (MBDA), a branch of the U.S. Department of Commerce. In announcing the award, Eric Dobyne, Chicago regional director of the MBDA, said, “Kellogg goes above and beyond the status quo to fully incorporate innovation and diversity into its global supply chain.”

Kellogg suppliers are also winning accolades. In October, Kellogg supplier Drake became the first woman ever chosen by the Council of Supply Chain Management Professionals (CSCM) to receive the 2012 Distinguished Service Award. As an example of her company’s growth, from 2003 to 2012 DSC’s contract with Kellogg increased from $18 million to $43 million.

But the drive toward diversity has never been about winning awards. “This is an imperative that helps us collectively achieve the Kellogg vision. We simply use the external recognition to keep pushing us forward,” said Mark King, global head of diversity and inclusion for Kellogg.

“We must embrace diversity as an ongoing journey,” Bryant said. “That, we believe, is the recipe for success.”

Cathy Kutch is director of supplier relations and diversity for Kellogg Co. She can be reached at editor@diversityexecutive.com.