Leading companies are making a strategic shift towards supply chain diversity with revolutionary programs that foster equitable opportunities and remove systemic barriers. These initiatives aren’t just about ticking boxes; they’re about creating opportunities for everyone. Suppliers are often an extension of a company’s supply chain and highly integrated into product development, cost reduction, and quality initiatives. When companies diversify their suppliers, they’re not only making their supply chains more inclusive, but they’re also tapping into a wealth of fresh perspectives and ideas. In this article, we’ll explore what supplier diversity is all about, why it matters for businesses, and the impact it can have. Let’s dive in and uncover the transformative potential of supplier diversity programs. 

Understanding The Power of Supplier Diversity  

Supplier diversity involves intentionally seeking out suppliers that are at least 51% owned by minorities, women, veterans, LGBTQ+ and/or individuals with disabilities. If this is a net new initiative, consider making new supplier contacts at conferences such as the National MBE Manufacturers Summit or National Minority Supplier Development Council (NMSDC) The goal is to establish a supply chain that mirrors the diversity of the communities where a company operates. It’s also a critical strategy to enhance market responsiveness, foster innovation, and build stronger relationships with customers and stakeholders. 

Here are key benefits of prioritizing supplier diversity: 

• Expand Markets: Supplier diversity programs help businesses to enter new markets and strengthen customer relationships. A recent study of 400+ top-performing companies found that 45% use supplier diversity programs to help win new business, especially with big customers and government contracts. In addition, increased competition from a broader supply base can improve quality and drive down costs. 
• Reduce Risk: A diverse and inclusive supply base provides a source of flexibility and agility, and when coupled with a strong supplier risk management program, can lead to a more resilient supply chain. 
• Attract Top Talent: Retaining and attracting top talent should be at the forefront of every business’ strategy. In fact, 52% of survey respondents said they want to work for a company that has a supplier diversity and inclusion program.  
• Boost Reputation: Resonating with a wider customer base and appealing to socially conscious investors can have major business benefits. In a 2019 study for Coca-Cola, individuals who were aware of Coca-Cola’s supplier diversity initiatives were 45% more likely to perceive the brand as valuing diversity, and 49% were more likely to use Coca-Cola products. The study found these favorable perceptions would lead to an additional 670,000 consumers using the company’s products.  

Supplier diversity isn’t just the right thing to do; it’s a strategic advantage. By investing significantly in diverse suppliers and fostering entrepreneurship among underrepresented groups organizations build resilience, unlock innovation, and set a powerful example of positive change. This commitment strengthens competitiveness and fuels growth for everyone involved. 

Breaking Down Strategies, Metrics, and Expansion 

A strong business strategy will support your efforts to enhance your supplier diversity program. Follow these steps to establish a solid foundation: 

1. Understand the current state: Assess existing suppliers to establish your baseline of diverse suppliers and how they are performing on KPIs, as well as where there might be opportunity to expand your business with the diverse supply base you already have. 
2. Define goals and metrics: Set a multiyear roadmap with a vision, objectives, and clear ownership. Quantify the impact of your program, from delivery performance to strategic and tactical initiatives. Track ROI to showcase the value of the program and inform goals for future expansion. After all, a study by NMSDC companies investing in supplier diversity have a 133% increase ROI, while a Hacket group study shows a $3.6 million boost to company’s bottom line for every $1 million spent on procurement and operating costs. 
3. Manage risk: Conduct supplier risk assessments to ensure that suppliers meet program objectives and metrics. Consider factors such as historical quality, delivery performance, sourcing tactics, and financial health of the supplier. 
4. Require certification: Develop high standards for your diverse suppliers through certification and training. Utilize certifications from reputable organizations such as National Minority Supplier Diversity Council, Women’s Business Enterprise National Council, and United States Hispanic Chamber of Commerce.  
5. Think local: Engage local suppliers to benefit from shorter lead times and increased transparency. Bolster ESG goals related to local economy and community development. 
6. Incorporate mentorship: Implement mentorship programs to foster strategic partnerships between diverse suppliers and executives, aligning goals and objectives. 
7. Streamline sourcing: Include supplier diversity considerations in your RFPs (Request for Proposals). Expedite inclusion of diverse suppliers for sourcing events, enabling on demand supplier activation. 

Ensuring Sustainability and Accountability in Your Supplier Diversity Program 

To ensure the sustainability of your supplier diversity program, it’s crucial to integrate strong suppliers into your core procurement decisions. Establish a committee comprised of key business stakeholders as champions – ideally with the Chief Procurement Officer and/or Head of Sourcing. This committee should work towards aligning supplier diversity policies with existing ESG initiatives and broader corporate metrics and goals. 

Companies demonstrate commitment to their supplier diversity metrics by allocating spend goals by department for sourcing diverse suppliers. They further drive progress with dedicated events such as “impact days” to highlight the contributions of diverse suppliers and facilitate discussions on best practices.  

With Clarkston’s expertise in supply chain and DEI services, you can navigate the complexities of supplier diversity and establish an enduring program tailored to your organization’s needs. Our comprehensive approach ensures a smooth journey towards a more inclusive supply chain, positively impacting your business and the communities you serve. 

Contributions from Ebony Forbes