By: Sarah Scudder
- Woman-owned business enterprises
- Veteran-owned businesses
- Service-disabled veteran-owned businesses
- Disabled-owned businesses
- Small business enterprises
- Historically Underutilized Business Zone (or HUBZone) businesses
- LGBT-owned businesses
Business leaders have become more focused on supplier diversity during the past few years largely because of changing customer expectations. Research indicates that today’s consumers – especially younger consumers – are more aware of the “social practices” of the companies they do business with and are increasingly demanding that companies have good corporate social responsibility records in order to win their business.
The State of Supplier Diversity
- Corporate social responsibility (72.3% of respondents)
- Alignment with corporate culture and workforce inclusiveness (65.8%)
- Customer requirements (55.5%)
A View from the Front Lines
- Community – An effective supplier diversity program will be embedded in the communities the business serves, which means that the program should reflect the social interests of the community.
- Customers – Research indicates that consumers – particularly millennials – now expect the companies they do business with to act in ways that are socially responsible. Therefore, business leaders must consider current and emerging customer expectations when designing supplier diversity programs.
- Competition – Every business operates in an environment where the actions of competitors can affect company performance. So, business leaders must stay aware of what their competitors are doing to improve supplier diversity.
- Compliance – This is a basic but still important factor because federal and state diversity spend mandates continue to pressure some companies to implement supplier diversity programs. The key for companies is to have processes and technologies that enable them to classify diverse suppliers and track spending with those suppliers.
- Customization – One frequently undervalued benefit of supplier diversity is that diverse suppliers can be an important source of innovation for larger enterprises. In many cases, small firms have greater flexibility to innovate, and companies can gain the benefits of this innovation by working with small suppliers.
- Costs – Reducing costs will always be an important priority in most companies, and until recently, managing a large number of small suppliers would add costs to the procurement process. Today, however, digital procurement technologies can enable companies to work with small suppliers without significantly increasing indirect procurement costs. As a result, supplier diversity goals and cost savings goals are no longer necessarily incompatible.
As far as the future is concerned, Mr. Robinson believes that supplier diversity will come to be seen as an important source of revenue, not just as a cost center. He also expects supplier diversity efforts to continue to expand on a global basis.