The Difference Between Tier 1 and Tier 2 Diversity Spend

We are living in an increasingly complicated and connected world that is constantly in flux as advances
in technology and a push toward globalization brings about new challenges — and solutions. One of the
brightest — and most useful — solutions available to businesses today is the ability to take advantage of
multicultural markets that offer unique perspectives and problem-solving capabilities. Cultural diversity
in the workplace — and specifically among suppliers — opens up rich opportunities for companies to
target growth and drive innovation.

In this post, we will look at understanding what diversity spending is, the difference between tier 1 and tier 2 spending, and how a GPO can help you reach your diversity spending goals. 

Understanding Tier 1 and Tier 2 Diversity Spend
When you focus on diversity spending during procurement, you are looking to spread your purchasing out
over a group or groups of diverse organizations. To qualify for this designation, these organizations must
be 51% owned by a member belonging to a diverse category. Examples include:

 Veteran-owned businesses (VOSBs)
 Service-disabled veteran-owned businesses (SDVOSBs)
 Women-owned businesses (WBEs)
 Small business enterprises (SBEs)
 LGBTQ owned businesses (LGBTBEs)
 Disability-owned businesses (DOBEs)
 Minority-owned businesses (MBEs)

Not only can these enterprises be a vital link in your supply chain, but they can help
attract investment and even foster more recruitment opportunities for your business.

Capturing Diversity Spend Using Tier 1 and Tier 2
There are two ways to manage your diversity spending using the Tier system:

Tier 1 diversity spending during the procurement process is earned when you partner directly with a diverse organization.

Tier 2 diversity spend occurs when you engage with a diverse supplier through a
relationship with a subcontractor.

When you engage directly with a diverse supplier, it is up to your procurement management team to
ensure they are correctly classified as a diverse business — and to manage equity among business
classifications. For example, ideally, you would want to divide your diversity spending among several diverse
classifications equally for the most unbiased and equitable spending.

Hitting Tier 1 and Tier 2 Diversity Targets Through a Group Purchasing
Organization (GPO)

Group Purchasing Organizations (GPOs) offer businesses sourcing options that can target goals and
strategies that promote procurement success, such as enlisting more diverse supply chain partners.
GPOs not only do the legwork of vetting suppliers, negotiating contracts, and more to help you target
supply chain inefficiencies, but they are also able to bring together talented and diverse organizations
with which you can partner.

When you work with a GPO on diversity spending, you can be assured that your supplier meets the
requirements of a diversity classification through third-party organizations that provide such
certifications. However, you can sometimes find businesses that are not only classified as diverse organizations in their own right, but also provide the benefit of using a diverse supply chain to source their products, allowing you to increase your diversity profile.

Do You Need Diversity in YOUR Supply Chain? ASE Can Help
As our world grows more interconnected, diversity becomes even more important to growing strong,
resilient businesses. Having a robust network of diverse suppliers gives your business access to a range
of perspectives and elevated problem-solving skills that are not possible in a homogenous supply chain.

At ASE, we are serious about supplier diversity and work consistently at forming partnerships with a
wide range of certified diverse suppliers and partners. As a Service-Disabled, Veteran-Owned Business
(SDVOSB), ASE has consistently pursued — and achieved — diversity goals. In 2020, we stood tall as the
largest veteran-owned business and are proudly a part of the HP Power Partner Diversity Network. Not
only can we be an asset to your supply chain as a diverse business of our own, but we actively pursue
diversity initiatives of our own that both broaden our supply reach and provide additional opportunities
for our customers to reach their own supply diversity goals.