The best‐practice supplier diversity program at Caterpillar

Abstract

PurposeThe purpose of this paper is to profile the successful implementation of a corporate‐wide supplier diversity program utilized by Caterpillar, Inc., one of the Fortune 500 companies. Caterpillar's supplier diversity program can be a blue‐print for other companies which would like to accomplish the corporate mission of promoting the free enterprise system by prohibiting restraints of trade, unfair practices, reciprocity, or abuse of economic power.Design/methodology/approachTo comply with stricter government regulations demanding a diverse supplier base and match a supplier base to changing customer demographics, a growing number of purchasing organizations have launched supplier diversity programs. Despite such a trend and abundant theory about the supplier diversity program, there is a paucity of case‐based research that can explain what it takes to become a supplier diversity champion. To fill the void left by previous studies, the paper conducted an in‐depth analysis of Capterpillar's best‐practices and unearthed its secret behind the success.FindingsThrough Caterpillar's case, it was found that a supplier diversity program could not only help save sourcing cost, but also enhance quality at the source. Thus, it offers long‐term competitive advantages. Also, a key to the successful supplier diversity program is the buying firm's ability to adapt to new cultural change that breaks the ties with “good old boys networks”.Originality/valueThe paper elaborated on six different strategic initiatives that provided equal contractual opportunity to historically underutilized but qualified suppliers such as small, small disadvantaged, or women‐owned small businesses and leveraged such opportunity to create a strategic sourcing advantage. Other organizations that wish to develop supplier diversity programs may consider these strategic initiatives and emulate Caterpillar's success.