As Strategic Sourcing or Category Management professionals you are all familiar with Supplier Diversity. You may have quotas or “set-asides” that dictate what percentage of your spend must go to “diverse” suppliers based on internal policy, customer mandates or federal regulations. You have definitions around what is a diverse supplier and you may even require a very rigorous certification process for those suppliers to prove that they are indeed diverse. In many cases you have departments or dedicated professionals with the responsibility of policing your sourcing teams to ensure that the quotas are being met and probably spend a great deal of time tracking the diverse supplier spend. That is great! But what is the real VALUE to the business of that diversity? Do you know? Could you articulate it, if asked?
There is a solid business case for having a diverse supply base. If you have a Supplier Diversity department / function, please ask them to provide it to you (hopefully they have one 😊). Here is our take on the business case for Supplier Diversity programs:
- It is the Right Thing to Do – In the age of social responsibility, we should be promoting small, diverse suppliers. You will find that they often work harder, provide competitive pricing and provide the agility that many large suppliers cannot provide.
- Reflection of your Customer Base – They can provide insight into the needs of an ever-changing, more diverse customer base and perhaps open new markets for you.
- Mold the Types of Businesses you Want to Work With – Diverse suppliers can be part of a broader suppler development program. Often companies just can’t find exactly the type of supplier that will meet their specific needs. Diverse suppliers welcome the opportunity to develop partnerships with key customers and develop products / solutions that may not be readily available elsewhere. Because diverse suppliers are usually small, they can more quickly adapt to the needs of their customers.
- Promote Innovation – Diverse suppliers can often provide access to new and creative resources.
- Competitive Advantage – Allows you to partner with key stakeholders when facing changing demographics in customer communities.
- Create Variety in Sources – As many of you may be feeling the pinch associated with single sourcing in parts of the world that are now closed off because of the coronavirus, having some small, local, agile suppliers to tap into can be a very smart strategy.
- Win-Win for Both Parties – Many diverse supplier relationships can yield significant benefits for both sides – savings for you and increased revenue for your supplier.
How can you get your company engaged in and excited about Supplier Diversity? First, emphasize the overall business case for diversity and inclusion. If you have an employee diversity program tap into them because some of the strategies they deploy will work here as well. Consider holding a Diverse Supplier symposium, where your buyers / employees can meet these suppliers and learn what they do, and the suppliers can learn more about your business as well. Also, consider investing in these small businesses beyond buying from them. Many organizations invest in the growth of these suppliers by providing education, formal training, mentoring and even scholarships. Some even provide technical assistance like IT support which many of these small companies cannot afford.
Supplier Diversity is one way for Procurement to not just talk about social responsibility. There are so many benefits associated with establishing these relationships for both sides that it is really a no-brainer. Category Management requires a strategic look at your supply base and a strong strategy MUST include Supplier Diversity!
Please join in the conversation and let us know what you think . . . . .