Understanding Supplier Diversity: A Look at Widening the Supplier Base
The Evolution and Importance of Supplier Diversity in Procurement
Supplier Diversity, a strategic initiative aimed at promoting equal business opportunities for minority-owned, women-owned, veteran-owned, and other diverse suppliers, has its roots deeply embedded in the civil rights movement of the 1960s. This program, which is now a formalised part of many companies' procurement and sourcing processes, has evolved from a social inclusion initiative into a strategic procurement practice.
The origins of Supplier Diversity can be traced back to the American Civil Rights legislation of the 1960s, with a significant milestone being the 1961 Executive Order by President John F. Kennedy. Today, companies like Solenis integrate supplier diversity into their supplier selection and onboarding, proactively seeking certified diverse suppliers to foster economic development in underprivileged communities and support equal business opportunities.
The Core Elements of Supplier Diversity
The core elements of Supplier Diversity revolve around the inclusion of suppliers who are not otherwise given the same opportunities on an equal footing that are open to other, often larger suppliers and suppliers of demographic majority-type ownership. This proactive business program encourages the use of these diverse suppliers, with the objective being to provide business opportunities to those who would otherwise not have that chance.
The Role of Procurement Teams
In the area of Procurement, there has been a history associated with attempts to direct spending toward diversity-owned businesses. However, the initial focus on Supplier Diversity failed to gain traction, with concerns about the small amount of spend, difficulty in finding matches, and inability to meet on-demand delivery needs.
The Commodity Management Procurement team, in particular, was not measured on the Supplier Diversity program, with their focus being on cost takedowns and high spend areas. Lower spend opportunities received much less attention from this team.
Key Determinants of Supplier Diversity Program Success
Two key determinants of Supplier Diversity program success are executive level support and a culture of accepting change or creating resistance. Visibility to, or a database of, diverse suppliers is also essential for program success. Robust metrics and accountability to increase diversity supplier spend are crucial as well.
The Impact of Supplier Diversity
The contribution of Supplier Diversity to a company's supply chain and community engagement is multifaceted. Engaging diverse suppliers can increase supply chain flexibility, introduce innovation through new ideas and perspectives, and potentially reduce risks associated with supplier concentration.
By directing business to minority and underrepresented suppliers, companies contribute to economic growth and job creation in those communities, promoting social equity and fostering stronger community relationships. Having a robust supplier diversity program strengthens brand reputation, aligns with corporate social responsibility goals, and ensures compliance with government procurement regulations and diversity mandates.
Data-driven procurement practices, including spend analysis, help identify opportunities to integrate diverse suppliers effectively while aligning with strategic goals such as cost control, quality, and reducing risks. Supplier diversity programs benefit from such analytics to optimise sourcing and supplier development.
In summary, Supplier Diversity has evolved from social inclusion initiatives to a strategic procurement practice that not only supports community and economic development but also enhances supply chain robustness and corporate value. Companies today embed these programs into their procurement frameworks to drive innovation, compliance, and positive societal impact.
[1]: [Link to source 1] [2]: [Link to source 2] [3]: [Link to source 3] [4]: [Link to source 4] [5]: [Link to source 5]
Read also:
- Citizen Thekla Walker, Minister, urges: "Let's face our responsibilities at home"
- Editorial Correspondence: Justifying the Elimination of a Program Earmarked for Reducing Our Own Carbon Footprint?
- Parliamentary proceedings in Germany's Bundestag this week
- Fracking Breakdown: Advantages, Drawbacks, and Financial Implications
