What is second tier and what can it do for you?

May 01, 2011 by

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Most large corporations keep track of and post in their Annual Reports, among many other things, what they spend with diverse suppliers. You can see this in Allstate’s Annual Reports as an example. Many corporations report supplier diversity on a first and second tier level. It is important that you know what the tiers are and how you can benefit on both a first and second tier basis.

What is First Tier?  This is also referred to as direct spend. When I do business directly with a diverse supplier it is considered first tier. In other words, I write the check and pay them directly.

What is Second Tier?  Second tier adds another supplier to the mix. Let’s say I have a large contract with a major advertising agency. In support of that contract the major agency will subcontract some of the work for my corporation. If they subcontract to a diverse supplier that is second tier spend.

Many corporations have requirements and contract wording either requiring or strongly encouraging the use of diverse suppliers in any subcontracting activity.

So when you approach a corporation, first and foremost always come prepared, as explained in Five Best and Worst Approaches When Contacting a Corporation. But if you are not the right fit on a first tier basis, ask about second tier opportunities and perhaps an introduction to the supplier providing that service today.

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