Tier II Goal Methodology – Percent of APV / Payments Received 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. Percent of APV / Payments Received refers to the sales that have been received from a customer by the reporting Tier I Prime Supplier.
To correctly calculate a Tier I Prime Supplier’s Percent of APV, a Prime Supplier must report the following information:
- Total North American Payments Received
- Corporate D Payments Received
- Diverse Spend (can include Indirect and / or Direct Spend)
For this Tier II Report, Customers require Tier I Prime Suppliers report their Customer’s APV along with Diverse Spend. Once revealed, Total Customer Allocated Diverse Spend divided by a Tier I Prime Supplier’s Customer Payments Received dictates the Tier I Prime Supplier’s percent of Diverse Spend for the Customer.
Below is an example of the work
When looking at the example above the following data points are entered by the Tier I Prime Supplier to start (with Corporate D representing the Customer).
- Total North American Payments Received
- Total North American Purchases
- Corporate D Payments Received
- Corporate D Purchases
As we move forward the Indirect Spend % displayed is calculated based on Corporate D Payments Received ($25 million) divided by Total North American Payments Received ($100 million). This gives us the 25% shown above.
Corporate D Payments Received
————————————– = Indirect Spend %
Total North American Payments Received
Next, the Tier I Prime Supplier enters the following:
- Total Diverse Indirect Spend
- Corporate D Direct Diverse Spend
Once entered, the Total Allocated Diverse Spend is displayed based on the Total Diverse Indirect Spend ($10 million) multiplied by the Indirect Spend % (25%). This gives the Tier I Prime Supplier $2.5 million in Customer Allocated Indirect Spend. The $2.5 million is then added with the Direct Spend to give the Tier I Prime Supplier $3 million in Total Allocated Diverse Spend.
Total Diverse Indirect Spend X Indirect Spend % = Corporate D Allocated Indirect Spend
Corporate D Allocated Indirect Spend + Corporate D Direct Spend = Total Corporate D Allocated Diverse Spend
Once calculated, the Percent of APV / Payments Received for the Tier I Prime Supplier is determined by taking the Total Corporate D Allocated Diverse Spend ($3 million) and dividing it by the Corporate D Payments Received ($25 million).
Total Corporate A Allocated Diverse Spend
—————————————————- = Percent of Spend
Corporate D Payments Received
In the end, the report tells us that 15% of the Tier I Prime Supplier’s Customer Payments Received is attributed to Diverse Suppliers.
