Supplier Diversity Is a Smart Community Investment

By Andrea Oswald, general director-Strategic Sourcing

Large Retina | Inside Track: Oswald: Supplier Diversity Smart Investment

Macro-Z-Technologies, a Latino-owned construction company, recently won construction work on UP’s Sanderson Subdivision in Texas.

Although Union Pacific was the first Class 1 railroad to implement a supplier diversity program nearly 40 years ago, the company hadn’t spent much time over the last few years performing outreach to identify and onboard new suppliers. In 2020, we placed a new emphasis to make our supplier diversity program world-class.

You may wonder what exactly is a diverse supplier. Although definitions vary, UP recognizes diverse suppliers to be any company that is majority owned by someone from the following classifications:

  • Minorities (African American, Asian American, Latino American, Native American)
  • Women
  • LGBT
  • Veteran or Service-Disabled Veteran
  • Disabled
  • Governmental designations (HUBZone, Small Disadvantaged Business, Disadvantaged Business Enterprise, 8(a) Business)

But just as important a question: Why strive for supplier diversity?

The benefits are many. Supplier diversity introduces new products, services and solutions that might otherwise be overlooked. It’s an effective way to promote innovation while driving price and service competition. It many cases it’s an investment in the very communities in which we operate, promoting job creation at a local level.

Simply put, supplier diversity is just good business, and we believe diversity makes us stronger as a company and a country.

In 2020, UP spent $423 million with 275 diverse suppliers, which was a 29% increase from 2019.

  • Of that spend, $347 million (82%) was with women-owned businesses
  • UP only spent $11 million (2.5%) with Latino-owned businesses and $4 million (1%) with black-owned businesses.
  • Our largest supplier in 2020 was Automotive Resources Inc. (ARI), a woman-owned business that supports UP’s vehicle fleet ($217 million).

The data showed that UP has an opportunity to expand its supplier base, especially with black and Latino-owned businesses. We looked at potential areas of growth and set an aggressive goal to grow our total diverse supplier spending another 25% to nearly $530 million in 2021.

As of July, we have signed contracts with two new major suppliers:

  • Hightowers Petroleum, a black-owned business which won our fuel credit card spending of approximately $50 million annually; and
  • Macro-Z-Technologies, a Latino-owned construction company that recently won construction work on UP’s Sanderson Subdivision in Texas valued at approximately $5 million.

Through July, UP has worked with a total of 12 new diverse suppliers. It’s a great start, but to reach our 25% goal, we recognize that every UP employee must lend a hand. That means being willing to do business with companies we haven’t worked with in the past. There are challenges to onboarding new suppliers and familiarizing them with our processes and procedures, but with support from the UP team, new suppliers can get up to speed quickly.

It also requires a commitment from the suppliers, who have been eager to step up to the challenge. As Macro-Z-Technologies’ Rail & Civil Division Manager Hillary Hack told us, “We are ready to meet and exceed your expectations, and we will work as hard as we can to do just that.”

By using diverse suppliers, UP’s spending can better reflect the communities we all live and work in and strengthen our supply chain.

Share This!

Latest Stories