Creating equal opportunity for everyone in the business world, regardless of their race, religion, gender, nationality, or other characteristic, isn’t simply a matter of eliminating intentional discrimination. There remains unconscious bias, defined as unfairly favoring or discriminating against certain groups based on “subconscious, deeply ingrained biases, stereotypes, and attitudes formed from our inherent human cognition, experiences, upbringing, and environment.”
This unconscious or implicit bias is harder to spot, and therefore to remove, than outright prejudice – in part because people usually aren’t aware of it, in themselves or others. Yet it can crop up anywhere in an organization, keeping generations-old stereotypes in place and unfairly holding back some people while advantaging others.
This is true even in the case of procurement processes. One of the most common problems that procurement professionals and organizations face is an unconscious bias towards certain suppliers, which can end up disadvantaging those not in favored groups.
Here are some ways unconscious bias can slip into the supplier selection process:
- You or a colleague may have worked with a specific supplier before.
- You have heard a supplier’s name before and are familiar with them.
- Existing vendors, customers, or partners may have recommended suppliers from their network to you.
- Your requestor may have demanded a particular supplier.
- You may have a desire or a need to buy a specific product from a particular supplier.
The supplier selection process is primarily governed by purchase history. Procurement professionals usually check the last supplier they ordered from and complete transactions. In some mature processes factors such as lowest price, early delivery, sustainable impact, financial stability etc. are looked independently to make one off decisions. Buyers completely ignore looking into multiple parameters together and choose suppliers on the backdrop of tacit knowledge they acquire over a period of time!
The Impact on Business
This unconscious bias while selecting suppliers can have serious implications for business:
- Due to the bias towards a subset of suppliers, organizations tend not to use all their supplier bases, overlooking worthy options.
- Organizations may also fail to leverage their transacted suppliers efficiently for better price leading to higher priced purchases.
- Working with only a few suppliers mean they may not have the capacity to fill high-volume orders, which may lead to delay delivery.
- Choosing from a small pool of suppliers may limit availability, so buyers may end up with lower-quality goods or services.
- Some suppliers may take advantage of this bias and increase prices arbitrarily. This leads to spending leakage and increases in costs.
- Selecting incorrect suppliers could lead to missed opportunities. Suppliers tend to get limited access to RFQ events and reduced opportunities to work.
It is crucial that organizations understand and realize that even without conscious bigotry, unconscious bias does exist and can impact the business – and it needs to be addressed. True, eliminating unconscious bias completely isn’t possible, since the procurement process is dependent on people – and people have personal preferences or built-in assumptions that can’t always be brought to light. However, while it cannot be removed entirely, it indeed can be controlled.
How to Control Unconscious Bias
The first and most important step towards controlling the bias is accepting and understanding that it exists. An organization that wants to control implicit bias needs to know why it is happening and embrace the mindset of identifying them so that it can be controlled. Next, the organization should examine practices and policies, set up evaluation criteria for suppliers, or invest in systems that can help understand the bias better.
Here are some actions that can help an organization control the unconscious bias towards suppliers:
Find out how and where exactly the unconscious bias is happening within the procure-to-pay cycle and gather facts. Data-driven decisions always have more weight than relying simply on gut, speculation, or perception. With the correct data, organizations can find out if the bias towards some suppliers leads to spending leakage, fraud, or violating policies.
2. Embrace Supplier Diversity
It is always beneficial to embrace the business strategy of creating a diverse supplier base. Having a broad supplier base will allow the organization to float tenders more widely and get better quotes, thus reducing unconscious bias.
3. End-to-End Supplier Analysis and Evaluation
When adding new suppliers to your pool, it’s important to give them a fair and objective evaluation. A clear criterion needs to be defined to evaluate these diverse supplier relationships along with other standard parameters. The approach should also move from using independent factors for supplier selection to having a more combined holistic approach blending multiple factors together. Using data, reliability and confidence scores can be assigned to such suppliers, which eventually helps identify any bias, and corrective actions can be taken to reduce it.
4.Creating and Revising Policies
Evaluating diverse suppliers at regular intervals gives the organization an opportunity to identify gaps within its existing procurement policies. After these gaps are identified, making some tweaks or changes in the policies can help control the unconscious bias. Policies can also be set up to clearly define and differentiate boundaries between conscious and unconscious behavior.
Need of Procurement Analytics.
Procurement analytics solutions play a huge role in taking these above actions and controlling unconscious bias. Supplier analysis and continuous monitoring are some actions that can help organizations in becoming conscious of the bias within procurement.
ignioTM Cognitive Procurement is one such AI-based continuous monitoring solution that can help an organization steer on a path towards becoming conscious about the bias and providing deep insights on how to control it. Give it a try!