5 Elements of a Supplier Diversity Program
By Hugo Britt | December 2, 2021
Diverse supply bases are more resilient. They help businesses ensure continuity during economic downturns, managing shortages and the impacts of crises such as COVID-19. Without the bureaucracy and red tape slowing down decision-making at large organizations, small and diverse suppliers tend to move faster and can be more innovative.
Importantly, diverse suppliers can help companies access diverse (and previously untapped) markets.
In this article, we explore five elements of a supplier diversity program. But first, here’s a definition.
What is a supplier diversity program?
According to Thomasnet, supplier diversity programs “encourage companies to procure from businesses owned by traditionally underrepresented or underserved people such as veterans, women, people of color, and members of other groups.”
Diverse businesses face hurdles to growth such as lack of access to funding, networking opportunities, racial injustice, and other prejudices. Types of diverse businesses include minority-owned, women-owned, disabled, LGBTQ+, veteran-owned, and others.
Are supplier diversity programs mandated? It depends on the size of the contract. The U.S. federal government has pre-set goals around diversity spend for contracts exceeding $700,000, or $1.5 million for construction. But even where these mandates don’t apply, many organizations are implementing supplier diversity programs to access the benefits outlined above, and because it’s the right thing to do.
5 elements of a supplier diversity program
What exactly makes up a supplier diversity program? Here are 5 key components.
It’s very possible that you are already engaging with diverse organizations but don’t know it. Capture supplier diversity data by making it a part of new supplier onboarding, and survey your existing database to discover which suppliers are considered diverse.
A sophisticated supplier diversity program will not only identify diversity in your first-tier suppliers, but in their suppliers (second-tier), and so on. This may sound like an overwhelming task but is achievable with the help of Vendor Management Software (VMS) and third-party diversity accreditation bodies such as We Connect International.
Measurement and reporting
Use your VMS to track, report, and improve upon your supplier diversity program. KPIs to establish and track could include the number of new diverse suppliers onboarded, increase or decrease in spend with diverse suppliers, monetary savings, and other benefits from the program.
Community impact can be harder to measure, but by partnering with marketing you could also track the positive impacts of working with diverse suppliers in terms of the company brand and your employer brand.
Diverse supplier discovery capability
One of the major challenges in a supplier diversity program lies with discovery. Due to funding and networking hurdles, diverse suppliers often have difficulty getting onto purchasing organizations’ radars. Some ways to find and engage with diverse suppliers include:
- Accessing certified diverse supplier databases such as that offered by Thomasnet. Leading databases can be filtered by diversity type, such as women-owned, African American, veteran-owned, and so on.
- Attending diverse business networking events.
- Partnering with certification providers such as the National Minority Supplier Development Council.
Without leadership support, procurement will have an uphill battle bringing diverse suppliers into the supply chain. Unconvinced leaders will question why the organization doesn’t simply purchase from the biggest, cheapest, best-known suppliers every time.
A survey by JAGGAER found that “having top-level executive support for supplier diversity and CSR initiatives” was the number-one area of investment for organizations in terms of supplier diversity.
Supplier diversity programs are about equality, so diverse suppliers should be engaged in the same way as non-diverse suppliers, right?
Yes, it’s true that diverse suppliers should be given the same level of opportunity to win a contract with you, but once they are on board they may need to be treated a little differently. Diverse suppliers may need training, mentoring, and help with engaging you with and working through complex risk assessment. It may be the case that a small diverse supplier has never had to navigate the challenges involved in working with a very large organization, and may need help in this area.