Think about the country that you live in. Think about the organisation that you work for. Think about the team that you are currently working in. Consider the suppliers that your organisation has partnered with. To what extent do your team, organisation and suppliers reflect the customer base of the country (countries) in which your organisation is operating? How could you alter the perception of your customer base to enhance the image of your organisation? Would your CEO, board and shareholders want to see an increased impact on the bottom line?
What is Supplier Diversity?
Diversity and Inclusion (D&I) goes beyond the workplace. As some organisations in some parts of the world are increasing their understanding of the benefits of having a diverse workforce, the same principle applies to the suppliers that organisations choose to partner with. Supplier diversity can be defined as any business that is minority owned, woman owned, LGBTQ owned, veteran owned, disability owned and a small business. Public and Private Sector organisations around the world leverage the support of suppliers to help deliver on governmental and organisational priorities. Some global brands recognise that having a diverse supply chain unlocks more creativity and agility.
Benefits of working with diverse suppliers
Organisations like IBM, JP Morgan, Intel, Accenture, Capgemini, Google, GSK and Ernst & Young (and many more) have supplier diversity initiatives in place to help ensure that their customer base, reflect the suppliers (partners) that they have chosen to work with. What if your organisation was told that there was a way to save money, add creativity, and increase competition? When your customers can see that your organisation is making diversity a priority, this can lead to opportunities to increase its customer base. Going beyond the monetary aspects, and showing that your organisation is prepared to provide opportunities for all, it can help to improve social and economic issues. Organisations can enhance how it is perceived by the public, media, suppliers and millennials, thereby increasing value to the brand.
Millennials and Technology
Digitally adept customers are adjusting the rules of business. Millennials are driven by values and can influence opportunities and / or create threats for businesses. Social media provides a platform for users to “like” or “comment” which can increase or decrease the possibilities of a purchase being made whilst broadening (or shrinking) an organisations customer base. Research by Forrester (2017) commented that seven in ten US millennials actively consider a company’s values before making a purchase. Forrester noted that “to survive consumers’ volatile values-reckoning…marketers must create the context for consumers to make values-based decisions.” Think plastics in the ocean campaign, think ethical sourcing products, think Fairtrade.
Inclusive approach to Supply chains
Just as organisations in some countries have designed working environments that are more inclusive, the same principle applies to the supply chain. Senior leaders and procurement teams must demonstrate commitment, confidence and conviction that new products and services would add value to the organisation. Public and Private sector organisations in different parts of the world would benefit from being more proactive in collecting data on the ownership of the businesses that it works closely with. Organisations should consider implementing tracking systems to establish what % of their suppliers fall under the category of being a diverse supplier, or use this information to consider what needs to be done to broaden its supply chain. This data will help to inform what is going well or less well. The clothing retailer H&M have demonstrated their commitment to supply chain transparency and published a list of 98.5% of their suppliers’ names and addresses on their website, which is updated quarterly.
Sourcing Diverse Suppliers
Sourcing suppliers can be time consuming. Sourcing diverse suppliers even more so, as some diverse groups do not want to be given special treatment or to be identified as one. Take time to research the local laws and customs before introducing supplier diversity initiatives. There are organisations in the UK, USA, Canada, Australia and South Africa that provide certification to suppliers who meet certain criteria. Approaching organisations within these countries, saves a lot of time as introductions can be made. Also, it is worth noting that there have been cases where contractors have been charged for impersonating Minority Business Enterprises. Click here to read more.
Impact on the Bottom Line
A 2015 report by Ernst and Young (E&Y), discussed that leading procurement organisations that have a higher adoption rate of supplier diversity programs generate 133% greater return on the cost of procurement operations than average performers. This translates into an additional US$3.6 million to their bottom line for every US$1 million in procurement operations costs.
Research by The Hackett Group into the top performing organisations who have supplier diversity initiatives reveal the following:
99% of diverse suppliers meet buyers’ expectations; nearly a quarter of them consistently exceed expectation, dismissing any view that quality and overall performance suffers.
Up to 10% of sales come with supplier diversity requirements, suggesting that the lack of such a program can result in lost revenue.
Now what?
The strategic objectives of Public and Private sectors across the globe need to encompass Diversity & Inclusion initiatives beyond the workforce to their suppliers. This helps to broaden the customer base. As discussed earlier, many corporate organisations already recognise this and have developed a culture that is supportive of D&I. Enhancing the company brand, driving competitiveness, innovation and impacting on the bottom line are key features. In order for supplier diversity initiatives to be a success, the executive leadership of organisations need to communicate to the business the value-added that these initiatives generate.
Some questions that organisations in different parts of the world would benefit from asking themselves include:
- What does diversity look like in our part of the world?
- To what extent is our organisation currently working with diverse suppliers?
- How could we do things differently when sourcing suppliers?
- What impact would having more diverse suppliers have on our employer branding?
- To what extent do our diversity policies extend beyond our workforce through to our supply chains?
- What new steps will our organisation take to increase its customer base in order to impact on the local, national and global economy?
- What messages on social media would our organisation like value-driven millennials to “like” about our organisation?
- How transparent does our organisation want to be with the % of diverse suppliers that we are working with?
- How are we currently capturing supplier diversity data in our organisation?
- Does our organisation have the Leadership in place to create a culture that is supportive of diversity and inclusion?
As supplier diversity is still comparatively new, organisations would benefit from shaping it around more established D&I initiatives like workforce diversity. When designing D&I Supplier initiatives in different parts of the globe, executive leadership teams would do well to consider the legal context and social norms of the environment that it is extending this out to. Whilst this theme might have at one point been seen as a “nice to have”, is now a “must have”.
About the Author
Darren Jayaratne is a Business Psychologist who works closely with organisations in the UK and overseas at all levels, in the areas of Talent Assessment and Development. He was part of a team that trained the UK Civil Service to move away from using a Competency Framework for Recruitment onto a new method of assessment to increase Diversity and Inclusion.