Merck Canada, a pharmaceutical and health products company, is based in Montreal, Quebec, and employs approximately 1,400 people. The company has a manufacturing plant designated as a Centre of Excellence by the U.S. parent company and invests heavily in research and development. Clearly, quality and innovation are two of the company’s trademarks of success. One of the first interesting facts you learn about Merck from Serge Sauvé, Director of Global Procurement for Merck in Canada, is that, for various reasons, the Canadian Merck and the parent company Merck United States are at very different stages of development concerning supplier diversity. This gives a unique opportunity for companies to learn from Merck Canada’s efforts to establish a formal supplier diversity program from the ground up, while using the parent company in the U.S. as a model.
Sauvé is responsible for the northern cluster and regional team at Merck Canada, which means he supports procurement sourcing for Canada and some sites in the United States. Besides managing global procurement, he is the team leader for Canada supplier diversity. This gives him an excellent opportunity to bridge the gap between Merck Canada’s business needs and supplier diversity, while maintaining a broad perspective of how supplier diversity fits within general global procurement.
U.S. supplier diversity programs are well developed largely due to a series of government mandates, laws and regulations that prohibit discrimination and require a certain percentage of spend on government contracts to come from minority business enterprises. Though U.S. businesses develop their own supplier diversity policies for non-government business, companies like Merck U.S. require that Tier 1 and Tier 2 suppliers meet certain diversity spend goals on contracts. This has become a cultural characteristic of doing business in the U.S. In Canada, the government has not placed the same emphasis on supplier diversity, and as a result, there has been no imperative to expand supplier diversity spend by businesses until recently. Since the U.S. has extensive experience in supplier diversity in global sources, Sauvé reports to a senior Vice President at Merck U.S.
The interesting consequence of this scenario is that Merck Canada cannot be as competitive as it would like because it cannot meet contractual diversity spend requirements on U.S. contracts. It is precisely for this reason that Sauvé is aggressively reaching out to small companies that can be certified by WEConnect Canada or the Canadian Aboriginal and Minority Supplier Council (CAMSC). He explains, “If small companies can get certified and do business with large suppliers, it will be good for Canada. We will be able to compete with U.S. companies that are so focused on promoting diversity.” Developing that competitive ability could lead to significant new business opportunities.
Though we tend to think the onus is on the business to show initiative to get certified, many small Canadian companies are not aware of the certification process and the benefits certification can bring. Merck Canada is proving to be a leader in supplier diversity under Sauvé’s direction. He has three main strategies for success. The first strategy is to identify those companies that can get certified and then work closely with them and the certifying organisations. Merck Canada actually brings companies to the certifying groups like CAMSC for training and certification. Many of the companies are found by looking at the Merck Canada supplier base and then identifying who is eligible for certification. Sauvé also works closely with CAMSC and WEConnect to identify potential suppliers.
This aggressive approach is seen as necessary because the clinical and pharmaceutical industry is highly specialized and many eligible suppliers are simply unaware they could become Tier 1 or Tier 2 diverse suppliers. Even small companies could get their foot in the Merck Canada door through joint ventures or by becoming a supplier participating in an aggregated contract.
The second strategy is to develop a mentoring program for diverse suppliers. Taking cues from U.S. colleagues, mentoring is a best practice that can greatly increase the diverse supplier base. As Sauvé points out, “Many small suppliers have the potential but do not have the maturity level to deal with a large company like Merck. We are committed to launching a new mentoring program for diverse suppliers so that Merck Canada is better prepared to meet current and future business needs.” Currently, Merck Canada supports a number of educational programs that include science sponsorships in schools and specialised training for small companies. The training component could easily be rolled into the formal mentoring program.
The third strategy is to work with corporate peers across industries to build synergy. Networking plays a large role in this strategy. Because the Canadian government does not have a series of mandates concerning supplier diversity, the businesses must serve as the national catalysts and establish supplier diversity as a best practice for competitive success.
Aiming High
Asked if he has a goal set for the Merck Canada supplier diversity program, he responded, “Within five years, we want to be a top contributor to supplier diversity in Canada. We also want to become members of the Billion Dollar Roundtable, which recognizes corporations that show $1 billion or more spend with women and minority owned businesses.” Clearly, Merck Canada is aiming high by setting such ambitious goals.
Supplier diversity in Canada at this point is largely about building interest and momentum in the business community. “The very nature of Canada is based on a diverse community, so supplier diversity is a natural fit,” Sauvé notes. As the government becomes more involved in promoting the inclusion of diverse suppliers, the momentum is expected to grow at a more rapid pace. Through the efforts of people like Serge Sauvé, and others working in large corporations who are willing to take the lead, Canada is sure to experience steady progression. That is good for business, good for diverse suppliers and good for Canada.