Key takeaways
- While your reasons for implementing a supplier diversity strategy may vary, the outcome can benefit your organization, community, and bottom line.
- A successful diverse supplier program will require planning and commitment from every angle of your business.
In today’s world, diversity is essential. Most businesses know this and are incorporating diversity throughout their organization. In addition to employee diversity, many companies are now considering and adopting a supplier diversity mindset. That is, they’re making a point to use suppliers that are owned and operated by diverse folks.
Let’s look deeper into supplier diversity, why it’s essential, and how to implement its best practices in your organization.
What is a diverse supplier?
A diverse supplier is a business owned and operated by a person or group of underrepresented people. In the U.S., this can mean small businesses and minority and women-owned businesses.
If an organization wants to report they’re using diverse suppliers, it must ensure suppliers are certified through third-party certification. These certifications are crucial, because verification and authentication of the business helps open the door for opportunities. For example, diverse suppliers can contract with those businesses that plan to increase the number of diverse suppliers in their supply chain.
For example, the following organizations focus on ensuring that businesses are correctly categorized by offering nationally recognized third-party certification services.
- Women’s Business Enterprise National Council (WBENC)
- National LGBT Chamber of Commerce (NGLCC)
- National Minority Supplier Diversity Council (NMSDC)
- U.S. Department of Veterans Affairs Vets First Verification Program
- Regional councils
- State and local governments
Why is supplier diversity important?
The importance of supplier diversity is wide-reaching and depends a bit on how your organization functions. For example, it may make sense to use a diverse supplier because it saves your business money. However, it may also make sense if your team is looking to promote social responsibility from every angle.
Let’s look at how having diverse suppliers can add economic value. Diverse businesses can encounter challenges during their startup efforts. They can also face challenges such as access to capital and networking opportunities. However, adopting an effective supplier diversity strategy can alleviate these roadblocks.
Diverse suppliers tend to be small businesses, so they aid in the improvement of their communities. They do this by offering job creation, increased wages, and tax revenue for communities that may not otherwise see such advantages.
What advantages do diverse suppliers offer businesses?
Utilizing diverse suppliers can offer many advantages to a business. Benefits can take on many forms depending on what your company sees as an asset. That being said, there are some essential advantages that diverse suppliers can offer.
Diverse suppliers offer the following:
- Innovation
- Multiple procurement channels for goods and services
- More competition and lower prices
- Bragging rights when it comes to commitment to community economic growth
- Access to a new network of suppliers, products, and services
How is supplier diversity measured?
Diverse suppliers are classified and measured in a variety of ways. Most commonly, they include enterprises owned by 51% or more minorities, women, veteran, disabled, or LGBTQIA+ individuals. Classifications also include specific minority groups, and in the U.S., more than 15 categories are used to identify such businesses.
Most organizations measure the social and economic programs’ impact on business goals, not just compliance reasons. They measure these impacts to gain clearer insights into their bottom line and the communities where they’re located.
When measuring supplier diversity, there are several metrics to consider. These may vary depending on specific business needs.
Here are some of the most common supplier metrics:
- Total amount spent on diverse suppliers by department, division, or location
- Total amount spent per category, such as veteran or woman-owned.
- The number of new suppliers engaged by diverse categories
- Total amount indirectly spent, such as on job creation and community economic benefits
What are diverse supplier best practices?
When trying to find qualified diverse suppliers, you may run into challenges. A successful diverse supplier program will require planning and commitment from every angle of your business.
Here are some ways to help ensure success in your supplier diversity program:
- Define what your agenda looks like and weave it into your corporate policy
- Improve transparency in your supply chain
- Require commitment from everyone in your organization
- Integrate supplier diversity in the procurement process
- Offer training on what qualifies as a diverse supplier
- Seek out diverse opportunities
- Implement diverse hiring practices
- Implement check-ins to ensure commitment and adjust needs
Driving diversity
While your reasons for implementing a supplier diversity strategy may vary, the outcome can benefit your organization, community, and bottom line. You and your team will likely see more significant innovation, more competition, lower prices, and access to a wealth of impressive, talented suppliers certain to help your business.
Of course, it takes a bit of time and commitment, but if done right, supplier diversity will be as big of a part of your business as research, marketing, or IT.
FAQ
What is supplier diversity?
Supplier diversity means incorporating supplier companies owned and operated by a person or group of unrepresented people. For example, these diverse suppliers can include women, LGBTQIA+, and veteran-owned businesses.
Why is supplier diversity important?
Choosing diverse suppliers is an excellent way to save money, give back to the community, increase relations, and improve competition. It’s also a great way to solidify your company’s commitment to local and state agencies and reinforce your employee’s commitment to diversity.
