“Supply chain diversity” has become an increasingly important buzzword in recent years, as consumers demand more transparency about where their goods come from and how they were produced. Bellewether consults with large corporations to help them understand how to develop processes to select the best suppliers and work with those smaller companies in ways that are mutually beneficial. At the end of the day, the best way to achieve long-term supplier success is to engage in transparent, symbiotic, and sustainable business practices.
What is supplier diversity, and why is it important?
Supplier diversity refers to selecting suppliers and partner companies that are owned by minorities, women, veterans, members of the LGBT community, or other historically underrepresented populations. These suppliers are chosen not just because of the product or service that they offer, but because they are different and unique in their own right.
Although this concept has been around since before the Civil Rights Era, it has become increasingly important in an age of increased diversity, and increased emphasis on corporate ethics and transparency. As the nation becomes more diverse, organizations seek to broaden their supply chain network and develop more inclusive strategies. Marketing is becoming globalized, so companies can no longer afford to look to just one group of people for services and insights.
Historically, a significant amount of trade has gone to the majority population, in part because buyers tend to buy from people they relate to and who often look like them. So the majority buyers –in America’s case, white men—have for many years had an inherent advantage. But the modern consumer wants more diversity in products and providers.
Why should companies prioritize supplier diversity?
Supplier diversity can seem challenging, but in fact, there are several reasons why investing in a diverse supply chain can help companies achieve long-term success.
First of all, governments require supplier diversity, and there is increased oversight to regulate the utilization of suppliers. Hence, smart companies are proactive in curating their supply chain, so they are not caught off guard if or when policies become more prolific.
Secondly, new workers and younger consumers are increasingly demanding in expecting diversity. Younger generations do not want to solely live and work in homogeneous environments. Their interconnected digital age has made it possible for these consumers to know exactly how companies operate and what they stand for, so they make purchase decisions accordingly.
Of course, profit is important–and investing in supplier diversity actually does make economic sense for companies in the long run. Including additional players in the production process creates economic growth and strengthens communities, allowing more people to become consumers. Plus, companies with diverse supply chains have a better chance of winning net new business, especially from untapped consumer markets.
How can a company achieve successful supplier diversity?
When it comes to supplier diversity, “success” occurs as supply chain managers identify the right firms to engage. The next step is to build a funnel of emerging companies they can work with well into the future. This involves not only partnering with new and diverse suppliers, but organizing internal programming to foster increased emphasis on diversity within the larger corporation.
Companies that know more about the operations of their suppliers tend to win big. Companies should not just place orders with their suppliers, but become involved in their development and knowledgeable about their operations. Knowing the pain points in the supplier’s industry and business model will minimize risk for all parties.
To achieve a symbiotic business relationship with their suppliers, companies gain when they do more than just throw business at them; management should take steps to ensure that suppliers have the right champions, processes and structures in place for stable growth. On the flip side, suppliers benefit from understanding the culture of the larger company, as well as the community and industry. Small companies never stop growing–they are in a continuous cycle of development and improvement. As stakeholders to the benefits of their change, larger companies should play a role in their progress in order to ensure a stable partnership.
What are the biggest obstacles to achieving supplier diversity?
Although supplier diversity is now commonly acknowledged as an important part of business, many companies still have a long way to go before they achieve sustainable supply chain diversity. Often, companies fall victim to one of three common pitfalls: no plan or infrastructure, no budget, and no measurement.
1 -No Plan: To be most effective, management needs a fully-developed plan, and an infrastructure in place to enact that plan, before supplier diversity can be realized. An important part of this plan is educating internal associates about the purpose and importance of the supplier diversity initiative. If employees don’t know what it is or why they’re doing it, they will be unmotivated to take proactive steps. Supplier diversity is achieved when everyone is on board and clear goals have been set.
2 – No Budget: Unless an initiative explicitly improves a company’s bottom line, it can be hard to secure sufficient funding. Intentionally developing a diverse supply chain is an investment that requires time to see a full Return on Investment (ROI)–companies need a budget to cover the cost of developing smaller firms and creating internal programming. Although finding room in the budget might be tricky, these are necessary expenditures, and achieving supplier diversity has proven time and again to enhance corporate earnings and image. Note The Billion Dollar Roundtable.
3 – No Measurement: It is a common maxim in business that what gets measured gets managed, so it is important that companies establish a measurement plan to mark the progress of their suppliers in terms of income generation, management, procedure development, etc. In order to demonstrate the growth of a supplier, and the supplier’s impact on the larger corporation, companies should collect data across a variety of metrics and share that data with their suppliers. From there, management can make informed, data-driven decisions on where to invest.
Of course, no two companies are the same, and no two suppliers share the same challenges and sophistication. So Bellewether works with larger organizations with national presence in order to provide insight into supplier operations. This supplier information helps to minimize risk while maximizing the potential the relationship offers. Supplier diversity is here. Check out The 2019 Diversity Inc. Top 50 Companies for Diversity and become proactive in widening and differentiating the channel that helps meet customer needs and expectations.