Diversity initiatives have become a best practice applicable to almost every business. The purpose of supplier diversity is to encourage businesses to source their supplies from traditionally underutilized business vendors. Supplier diversity programs increase vendor competition, quality of goods and services, and potentially cut operational costs. Some of the diverse classifications include Minority-Owned, Women-Owned, Veteran-Owned and Small Business.
There are several reasons why companies implement supplier diversity programs from federal requirements to societal obligations and expectations. Regardless of the implementation reason, without diversity initiatives, businesses risk losing a competitive edge and falling behind in our continuously growing and changing population. If you are wondering how a supplier diversity plan can benefit your company, here are the top reasons to start the diversity conversation in your office:
Diversity associations are notorious for hosting networking events and bringing companies together. For example, the NMSDC hosts a yearly conference and business expo that garners over 6,000 participants! Not only do these types of events give you the opportunity to get to know about the association, but they are also a great way to meet new suppliers and create relationships with great companies that you may not have known existed. The more you reach out and attend diversity events, the more you will get to know extended business networks and these relationships can help you penetrate new markets and potentially gain new customers.
Create Competition and Return on Investment
Adding new suppliers into the supply chain promotes competition, as companies will be vying for your business. Companies will be more apt to provide the most competitive rates which translates into a reduction of overall cost of your business’s product or service. If you choose to create a bidding scenario for one project, you will also be able to choose the best supplier to meet all of your needs based on their location, quality of goods/services, as well as cost.
In 2015, The Hackett Group found companies that participate in a long-term supplier diversity program could generate a 133% greater Return on Investment than those firms that are not diversifying their supplier network. Companies surveyed by The Hackett Group reported that supplier diversity programs drive an additional $3.6 million to an organization’s bottom line for every $1 million spent in procurement operating costs while having a lower overall operating cost.
Sometimes you have to breathe new life into an old process and your supplier base is not an exception. Continually using the same suppliers can stifle creativity and create complacency within your organization and within your supplier base. You certainly do not want suppliers thinking that they will continue to have our business if they are not innovating and being competitive! To avoid this, it is imperative to introduce new and diverse suppliers to open your businesses up to new products, solutions, and services provided by the supplier.
In addition to new products and solutions, suppliers bring new ideas that can better your company’s research and development, or marketing teams, and push your company to better itself and think outside of the box. Recall that partnerships with diverse suppliers can help you break into new markets and gain new customers.
The growing minority population is shifting target market demographics. According to the U.S. Census Bureau, by the year 2044, more than half of all Americans will belong to a minority group. Diverse suppliers can provide valuable insight about minorities and their interests. In regards to marketing, this type of information gives your business the competitive edge when trying to improve strategy, enter emerging markets, and craft messaging. Moreover, collaborating with diverse suppliers goes a long way in creating a positive and socially conscious reputation.
Bringing diverse suppliers into the supply chain has many benefits for companies, communities, and the economy. The US Census Bureau estimates that minority purchasing power will increase to $3 trillion by 2030, so there is still time to catch up and implement a Supplier Diversity program or increase your diverse spend. Just remember, in order to report and record your diverse spend, your suppliers must be certified through a third party such as the National Minority Supplier Diversity Council, or U.S. Department of Veterans Affairs Vets First Program.