Disruptions in global logistics can have dire consequences. Factors like extreme weather events, geopolitical conflicts, and cyberattacks can negatively affect the supply chain in different ways, and businesses have to be able to adapt when they hit. One key way to ensure resiliency and adaptability is through supply chain diversity.
The COVID pandemic is one of the most recent examples of this happening. It has created long-lasting shortages of everything from steel to snack foods, and the strain it’s placed on the global logistics network is highlighting weaknesses that have existed for years.
Diversifying your supply chain helps safeguard against disasters by providing the flexibility to meet the demands of a changing environment. More suppliers in more communities mean a greater number of access points. And that means more flexibility at every step in the logistical process, which supports your business objectives in addition to benefiting your customers. For top executives, protecting your company against major disruptions needs to be a high priority. When done right, it can provide you with an incredible competitive advantage.
Here we’ll go over why a diverse supply chain can put you ahead of the competition, how to diversify your supply chain, and share some insights from corporate leaders.
Why Diversifying is Important for a Competitive Edge
Every business is looking for the right tools to put itself ahead of the rest. Bringing diverse suppliers into your company is one of the smartest ways to do just that.
Diverse suppliers — those companies that are 51% or more owned by women and/or minority groups — provide insight into what their communities want that’s impossible to get otherwise because they’re connected at the ground level. Local partnerships tell you what people want and provide an entry point for your product or service.
Large companies like Walmart and CVS regularly utilize the practice of working with diverse suppliers. President and CEO of Walmart, Doug McMillon, is fully aware of all the benefits that a diverse supplier portfolio brings to his company:
“For our suppliers, working with Walmart means access to the 275 million customers who shop our stores around the world each week. For us, supplier inclusion means delivering better products and a broader selection to the communities we serve. We encourage diverse companies to explore new possibilities with Walmart.”
When you consider the fact that better quality and broader selection goes hand in hand with more customers interested in buying those products, it’s easy to see how this kind of approach benefits Walmart just as much as it does its partners.
In fact, in a system like this everybody benefits, including the communities that your suppliers and customers are a part of. Raul Suarez-Rodriguez, the former manager of supplier diversity and strategic procurement for CVS, put it this way:
“Collaborating with more than 246,000 colleagues across all 50 states, Washington, D.C., Puerto Rico, and Brazil, CVS Health focuses on spending power through direct purchases from its diverse supplier base, subsequent purchases from each company’s supply chains, and spending by employees of these companies in a wider economy.
Through partnerships with diverse suppliers, we believe that we are best able to deliver a wide range of innovative services and products to our diverse customer base. These partnerships also make a significant economic impact in communities across the country.”
While diversification gains you new relationships and opportunities, it’s also ethically necessary for companies to diversify at every level. A company can’t be reflective of or do the maximum good in its community without a diverse makeup.
How to Do It Yourself
When managing your supply chain, there are generally four points to consider:
- Cost
- Speed
- Quality
- Flexibility
These elements each affect one another and need to be in balance. Bringing in a greater number of diverse suppliers at multiple levels of the chain strengthens all of them.
Cost should never be the sole determinant of whether or not to work with a supplier. If they’re slightly higher in cost, but offer greater flexibility of services, for example, they’ll be an invaluable asset in the long run. Those extra dollars will be worth it when you can keep your product on store shelves when others can’t.
Instead, look for suppliers that will be the best match for your business. Working with people whose values align with yours will ensure quality across the board.
Say you manage a hospital and need to contract out cleaning services. You care about the safety and health of your patients, so instead of partnering with a low-cost company who does the bare minimum, you bring in a diverse company with a track record of using cleaners and procedures that are safe for everyone.
Not only is this the right decision for your patients, the community will see that you’re walking the walk and not just paying lip service to diversity as some abstract concept. That builds community goodwill and strengthens your reputation.
Your suppliers should also have expectations and standards compatible with your own. It should be easy to stay on the same page with them regarding what they’re providing and what level of quality to expect from their work. A values, expectations, and standards match is the ideal situation with any supplier. It creates an environment of equitable exchange between you and diverse communities where everyone can thrive.
Building a Strong, Competitive Supply Chain
Once you’ve built a robust and broad supplier network, you’ll be much better prepared to address issues of:
- Risk
- Product quality
- Safety
- Savings
- Product availability
And you’ll be able to do it in ways that benefit the greatest number of people.
Whether it’s last-mile trucking solutions, construction, warehousing, or anything in between, diversity in your supply chain operations means a greater variety of products and services at your disposal. You can address a greater number of needs and build strong community relationships that help establish goodwill. In turn, the communities you reach will reward your dedication with their loyalty.
Diversity isn’t a checkbox. It isn’t “nice to have.” It’s the reality of the world we live in. It ensures you can satisfy the needs of your customers while maintaining ethical practices and equitable growth.
Managing a business isn’t easy. For more advice on running yours efficiently and effectively, check out our blog or contact us to see how we can create a custom plan to help you succeed.
