Diversity has long been a hot topic concerning employer brand and workplace satisfaction.
Couple this with the fact that young consumers are placing increasing importance on social causes. It’s no wonder many brands are diversifying their customer-facing teams.
Yet, the conversation about diversity doesn’t end in the workplace. Instead, diversity can benefit your business at every stage. This includes your procurement and supply chain.
For example, cognitive diversity drives innovation by up to 20%. Not only that, racially diverse teams are 35% more productive. These are just a couple of the many stats proving the benefits of diversity.
But hopefully, this provides a flavour of what your firm can gain.
So, is your supply chain currently passing the diversity test? In this article, we’ll cover what supplier diversity actually is. We’ll also explore how to ensure your procurement process is more inclusive.
Let’s dive in!
What is supplier diversity? inclusive procurement
According to CIPS (the Chartered Institute of Procurement and Supply), “Supplier Diversity” describes the steps undertaken by a contracting authority to ensure all relevant potential suppliers have fair and equal opportunities within their supply chain.
The aim is to be inclusive of all types of businesses run by a diverse range of people, such as:
- Micro, small and medium enterprises (ranging from 10 to 250 employees)
- Local vendors
- Enterprises that are majority-owned by minority groups, such as:
- Ethnic minorities
- LGBTQ+ people
- People with a disability
The Council for Supplier Diversity sets strict guidelines for what constitutes a diverse supplier. To win that label, the business in question must be at least 51% owned and operated by one such group.
As such, it can be challenging to certify which companies vying for a contract fulfil the correct requirements.
Why should you ensure diversity in your supply chain?
Is diversity a new consideration for your business? The benefits of an inclusive supply chain might not be immediately clear. Nonetheless, they are plentiful in the long term.
The impact on employer branding
Diversifying your supply chain meets increasingly ethical business expectations. As a result, social responsibility is becoming a more significant focus in brand perception.
It’s important for stakeholders, customers, and employees alike. The State of Sustainable Supply Chains report says that effective supply chain diversity programs can help companies win the war for talent.
Needless to say, this is increasingly important as the labour market continues to tighten.
Improve profits and economic impact
Smaller, more diverse businesses are becoming a significant force of economic growth. Choosing a diverse supplier can have benefits for your business.
A much smaller or local form, for example, may be able to jump onto your project sooner and act with greater agility. The ROI of effective supplier diversity programs is measurable.
Studies have found that returns are as high as 133%. For example, companies that dedicate 20% of their spending to diverse suppliers can attribute 15% of their annual sales to their diversity programs.
Another reason to care about diversity in your supply chain is that global demographics are changing.
The US population is turning towards a minority-majority. Racial minorities are becoming an increasing demographic and economic force. Their spending power is projected to increase to $3 trillion by 2030.
Millennials and Gen Z are also an increasingly diverse generation and two of the largest. They’re entering the workforce and making more purchasing decisions.
As such, their priorities and opinions matter more than ever. Diverse and inclusive supply chains can be key attractors for these consumers.
Finally, diversifying your supply chain can unlock unforetold opportunities for your business. Not least because a multitude of perspectives helps drive innovation and facilitates better problem-solving.
Challenges to supplier diversity
If you’re unsure if your company has taken sufficient steps towards supplier diversity, you’re not alone. Unfortunately, despite the many advantages, only 19% of companies have a supplier diversity program.
One critical issue diversity faces in supply chains is that small departments often don’t get a seat at the procurement table. They don’t get a say in purchasing decisions and wield little influence.
The key is going beyond token departments. Instead, the aim should be driving towards comprehensive supplier diversity and economic equality.
Another obstacle to supplier diversity is finding minority-owned vendors that meet procurement requirements. In response to this, companies can seek out small, diverse suppliers.
It doesn’t matter if these aren’t yet certified. From there, they can create mentoring and training programs to help meet their standards. Or, they can partner with relevant councils that support diverse small firms.
Finally, true supplier diversity suffers from a lack of accountability. How will firms verify their investments go to the right groups? Similarly, how can they confirm that their chosen suppliers are genuinely diverse?
Many companies with supplier diversity programs have now established oversight mechanisms. UPS, for example, has a council that oversees the reporting on diverse procurement.
They also work with a third-party firm to confirm supplier certifications. These evaluations are undertaken every quarter.
Time to step up
If you can’t proudly claim an effective supplier diversity program yet, there is no better time to act than now.
Investing in diverse suppliers drives innovation, achieves economic growth, and puts you on the right side of history as demographics continue to change.
If you want to enact more inclusive procurement, our team is here to help you. Our software provides the tools you need to centralize purchasing and procurement.
Easily manage your suppliers for easier auditing and accountability. Request a free demo today to learn how we can help you.