Tier II Goal Methodology – Percent of Purchases is a type of goal calculation that determines the percent of Diverse Spend attributed to a Tier I Prime Supplier within a Supplier Diversity Tier II Report.

To correctly calculate a Tier I Prime Supplier’s Percent of Purchases, a Prime Supplier must report the following information:

  • Total North American Purchases
  • Total Diverse Spend (can include Indirect and / or Direct Spend)

For the Percent of Purchases Goal Methodology, Customers require Tier I Prime Suppliers to report their Total North American Purchases and Total Diverse Spend.  These two data points, after calculation, determine a Tier I Prime Supplier’s percent of Diverse Spend for the Customer.  While the Total Customer Allocated Diverse Spend may be asked for during a report, it is not necessary in determining a Tier I’s Percent of Purchases.

Below is an example of the work

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When looking at the example above the following data points are entered by the Tier I Prime Supplier to start (with Corporate B representing the Customer).

  • Total North American Sales
  • Total North American Purchases
  • Corporate B Sales
  • Corporate B Purchases

As we move forward the Indirect Spend % displayed is calculated based on Corporate B Sales ($25 million) divided by Total North American Sales ($100 million).  This gives us the 25% shown above.

Corporate B Sales
                                           ————————————–     =  Indirect Spend %
Total North American Sales

Next, the Tier I Prime Supplier enters the following:

  • Total Diverse Indirect Spend
  • Total  Diverse Direct Spend

Once entered, the Total Diverse Spend is displayed based on the Total Diverse Indirect Spend ($10 million) added to the Total Diverse Direct Spend ($3 million).  This gives the Tier I Prime Supplier $13 million in Total Diverse Spend.

Total Diverse Indirect Spend  +   Total Diverse Direct Spend   =  Total Diverse Spend

Once calculated, the Percent of Purchases for the Tier I Prime Supplier is determined by taking the Total Diverse Spend ($13 million) and dividing it by the Total North American Purchases ($55 million).

Total Diverse Spend
                                    —————————————————-     = Percent of Purchases
Total North American Purchases 

In the end, the report tells us that 23.6% (or 24% when rounded up) of the Tier I Prime Supplier’s Purchases are attributed to Diverse Suppliers.