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Making the Business Case for Supplier Diversity

As a large technology firm or other corporation, having employees from many different backgrounds – workforce diversity – is important, but it is not the same as supplier diversity. Lots of companies even work with diverse businesses at various levels of sourcing and partnerships already. But if you’re not measuring it or keeping track of those connections, there’s no way for you to talk about what you are doing or improve upon it.

 

What is Supplier Diversity?

Workforce diversity involves being diligent about hiring qualified team members of different genders, ethnicities and sexual orientations. Supplier diversity means proactively encouraging work with companies that are minority-owned, woman-owned, veteran-owned, LGBT-owned, etc. Both are extremely important for reflecting your core customer demographics and contributing to broad representation necessary in business that is currently lacking.

Although minorities and women make up a substantial portion of business owners in several sectors of the economy, their industry revenue shares are disproportionate to that presence. So while minority-owned firms made up 41% of all companies, they only took in 10.9% of the revenue.

Supplier diversity programs aren’t created overnight. It is a progressive journey that must be measured to make a difference at every stage. It isn’t about giving entitlement where it’s not due. All companies, certified or not, must lead on the merit of their work. But opportunities are typically not as available for minority-owned businesses, so these programs and certifications are simply a way for them to gain visibility and the chance to prove themselves.

 

Benefits of Supplier Diversity

Supplier diversity programs are part of overall corporate social responsibility. They are more than that, too, and fall in a very important category of their own. Sourcing from diverse vendors just makes good business sense.

Working with diverse businesses allows your company to:

  • Promote innovation by tapping into new and varied creative resources and benefit from the agility of small businesses that can innovate and create quickly.
  • Partner with key stakeholders to gain a competitive advantage when facing changing demographics in customer communities.
  • Give access to multiple procurement channels through which to promote and engage numerous suppliers for optimal selection and overall savings.
  • Demonstrates interest in, and commitment to, your community’s economic growth.
  • Develop a simplified path to finding and managing new and improved suppliers.
  • Increase community involvement and competitiveness from minority- and women-owned businesses.
  • Identify additional ways to save or new revenue opportunities.

By adding variety to where you source products for your business, you increase your opportunities to create a more well-rounded business.

 

Progress Across Industries

Since 2001, the Billion Dollar RoundTable has celebrated and recognized companies that have spent at least $1 billion dollars with minority and woman-owned suppliers. It encourages companies to continue growing their supplier diversity, and is a resource for best practices and strategies.

Among these members is Microsoft, a company that exceeded $2 billion in annual spend with woman and minority-owned businesses. They are already planning their next milestone, achievable due to the efforts of a procurement team that is dedicated to increasing diverse supplier expenditure each year. This tech company evaluates potential suppliers against their own business values, matching themselves with different vendors who can help them toward their overall goals.

In 2015, the number one company for supplier diversity, according to DiversityInc, was AT&T, where suppliers make up one of their ‘four pillars of diversity.’ Among the top 10 list, three of the companies are in the tech industry, while others show up in healthcare, hospitality, and consulting. These leaders excelled by integrating supplier diversity into corporate goals, auditing supplier diversity numbers, and sponsoring educational opportunities for diverse suppliers.

There are several different approaches and focuses your company can take in its plan for diversifying the supply chain. Google launched a Supplier Diversity Program in 2015 that invited diverse businesses to work with them as well as learning alongside them through the Google Academy and giving them discounted access to Google’s Apps for Work. As they take steps to build a strong supplier diversity program, Google is also focusing on ways to empower their incoming partners with the tools and support they need to improve and grow. . In an attempt to make the process easier and more accessible, the tech giant is not requiring any sort of third-party diversity certification to join. Their program is based on inclusivity of small (fewer than 50 employees), US-based businesses that are earning revenue of less than $15 million annually.

 

Best Practices of Supplier Diversity Programs

How will your company begin to measure and encourage diversity in its vendors?

  • Determine your baseline.

Start out with a fact-finding mission to collect the data that will give you your baseline. What is your current spend with diverse businesses? How many different minority-owned businesses do you source from? How has this changed over recent years?

  • Build a database.

Keep a record of all of your current diverse suppliers and what your spend is and has been. Additionally, maintain an index of those diverse suppliers which have responded to RFPs or otherwise applied to work with you in case future opportunities arise for which they are qualified.

  • Partner with third-parties that certify diverse suppliers.

Gain access to a full list of potential vendors that have already been vetted for their minority or woman-owned status.

  • Set measurable goals.

Determine where you are now and consider what your next steps will be. Establish reasonable, measurable goals that can carry your company forward. Integrate those goals with corporate objectives, and find ways they can work in tandem.

  • Participate.

All of the diverse supplier organizations listed above hold regular regional and national matchmaker meetings in addition to larger conventions and conferences. Get involved. Sponsor a keynote speech or panel discussion. Send a team to man a booth to share information about your company and what your specific needs are. By putting your name out there, you’ll get even more qualified diverse suppliers seeking to work with you.

  • Follow up.

Audit your supplier-diversity numbers regularly and investigate any irregularities. Check in with your internal buyers to ensure that enough suppliers are certified, and that they are meeting your organization’s needs. Maintain those connections you make at the diverse supplier events as well, you never know when a novel business requirement will crop up that could be easily solved through a diverse partner.

  • Invest.

Your company can do more than buy from these diverse vendors. You can invest in their growth and improvement through educational opportunities, formal training, mentoring, and scholarships. Not only will this contribute to their overall economic well-being, it will improve the quality of the product and services that you are buying, and improve your own offerings in the end.

  • Communicate.

Work with corporate communications teams to emphasize the importance of supplier diversity both internally and externally. Raise awareness of company efforts, encourage the generation of ideas, and make these connections part of a larger business plan.

 

Expand corporate responsibility goals to include diversity as a top-to-bottom goal. With the huge number of businesses that are have long been focusing on diversity in their supply chain, your company has a variety of role models and program goals to choose from. This is your opportunity to make your business dealings representative of the world we live in, in addition to benefiting from the many unique ideas and perspectives that are out there.

Should you have any questions or would like more information about Supplier Diversity, please reach out.

 

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