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The sourcing of goods and services from companies owned by women, minorities, veterans or people with disabilities, supplier diversity is a win-win for companies, suppliers and communities. A smart business strategy, diversifying supplier bases can also help create a more inclusive and prosperous economy as a whole.
Even with their obvious benefits, supplier diversity programs don’t always live up to expectations. Companies aren’t always aware of the benefits of diversifying their supplier bases, for example, while others just don’t know how to implement a supplier diversity program. Within certain product or service categories, there may also be a lack of qualified suppliers from diverse backgrounds.
Procurement departments face different challenges on the supplier diversity front. The procurement process itself is often complex and time-consuming, for example, making it difficult for companies to add any new suppliers—not to mention those from diverse backgrounds. Unconscious bias may also come into play here by leading buyers to favor suppliers from more “traditional” backgrounds.
“Despite strong commitment from the board and the C-suite, many companies struggle to achieve their supplier diversity objectives,” Bain & Co., reports in Supplier Diversity: How to Overcome Four Key Obstacles. Some companies assume that working with diverse suppliers will make them less efficient, for example, but Bain says that’s not the case. In fact, leaders in supplier diversity often use electronic purchase orders and invoicing, and benefit from doing a higher volume of work with contracted vendors.
3 Things Leading Companies do Differently
Companies trying to get supplier diversity right have some good role models to follow. According to a new Supplier.io report, most organizations agree that supplier diversity is crucial to their business. “In many cases, the top-performing programs are not necessarily older or better resourced, but they behave in ways that other programs can learn from and emulate,” the company states in its 2023 Supplier Diversity Strategies report.
Supplier.io says these are some of the steps that leaders in supplier diversity are taking to set themselves apart from the rest of the pack:
1. Making good use of their data. All companies use data, but supplier diversity leaders make better use of that data. “Leading organizations track metrics to the business unit or product level, set very clear goals and targets, and use data to hold specific teams accountable and provide them with clearer feedback.
“To ensure accuracy, all of the leaders we interviewed use third-party diversity data and map it down to the business unit level,” Supplier.io reports. They then use that data in dashboards, to develop business unit-specific diversity targets, and for forecasting and coaching.
“Business unit leaders are not only measured but also held accountable,” the company adds. “At one organization, 20% of their executive scorecard was tied to achieving their supplier diversity goals, which carries the same weighting as cost savings goals.”
2. Proactively planning and identifying opportunities to include diverse suppliers. By connecting business unit leaders and buyers well ahead of the request for proposal (RFP) process, diversity leaders can bring in diverse suppliers earlier and for specific purposes, identifying ways to innovate together while planning out future opportunities.
“When leaders do category planning with procurement, they include the business unit leaders to discuss future projects that may not yet be on procurement’s radar,” Supplier.io says. “This provides earlier insights into potential opportunities.”
3. Making it easy for everyone in the organization to work with diverse suppliers. Leading programs don’t just provide personalized data, coaching and accountability, but they also provide tools and processes to make it easy for everyone to work with diverse suppliers.
“They provide a central way for business and procurement teams to find and source diverse suppliers, providing them with the necessary data to select the best one,” the company reports. “Some even make it easier to work directly with diverse suppliers. For example, in one program, buyers can bypass the RFP process for contracts under a pre-determined amount if they select a diverse supplier.”
