There’s no doubt the benefits of diversity within organisations have been widely acknowledged for many years. Now, more and more organisations are beginning to realise the importance – and long-term advantages – of making diversity a strategic priority in other areas of the business, like procurement and supply chain management.
As a business practice, supplier diversity refers to purchasing goods or services from businesses owned by underrepresented groups such as Indigenous Australians, women, and disability enterprises. It also means actively supporting inclusion opportunities in the supply chain. Supplier diversity has several benefits and can impact an organisation on many levels. As such, it should not only be critical to your procurement strategy but inform how your organisation approaches diversity altogether.
The pandemic has highlighted the fragility of supply chains across the world and offered an important proof point as to why greater supplier diversity is extremely valuable for organisations.
Why you need a diverse supplier base
It can help promote innovation
If you continually use the same suppliers without branching out, organisations risk missing out on creative and innovative benefits. Small and medium-sized businesses have an advantage over large organisations in that they are more agile and can innovate more quickly. The pandemic highlighted how many smaller businesses were able to adapt to changing demands and innovate faster – for example, multiple Australian breweries diverted to manufacturing hand sanitiser to meet increased demand.
Exposure to diverse suppliers also means exposure to new ideas, mindsets, and perspectives. Without having these businesses in your supplier network, organisations won’t experience the depth and breadth of innovation that naturally occurs when with greater diversity.
It can create opportunities in new markets and drive down costs
Organisations with supplier diversity programs are more likely to penetrate new markets and gain new customers. As you reach out to more suppliers, you will become privy to each of their business networks, creating new opportunities to extend your own. With more organisations investing in supplier diversity programs, competition between suppliers is also increasing. This can have multiple positive impacts including lower costs and higher quality products and services, as suppliers compete for business.
It also reduces supplier risk with a more resilient and agile network. If the pandemic has taught us one thing, it is that the business environment can change very quickly, and organisations must be prepared to respond.
Your customers want it too
Your suppliers should reflect the diversity of your customers and the communities where you operate. Stakeholders including customers, employees, shareholders, and investors are increasingly demanding higher levels of social responsibility and accountability. Actively including diverse and marginalised suppliers in your network is no longer a ‘nice to have’ but is expected of organisations. Organisations that make supplier diversity a priority are also likely to be perceived more positively by stakeholders.
How to create and grow your supplier diversity program
Engage senior leaders and build a business case
Having an organisational culture that values and celebrates diversity is critical to the success of any supplier diversity program. Without a genuine commitment to amplifying diversity within your own organisation, your supplier diversity program is bound to fail. This commitment must come from the top to ensure it is a priority across all levels. Start by building a business case that demonstrates the benefits. To promote executive buy-in, identify leaders who can champion supplier diversity and be an active voice in making it a critical part of your long-term business strategy.
Find and collaborate with diverse suppliers
Identifying the right suppliers takes time, but is critical. Supplier directories like Supply Nation which provides an extensive database of Indigenous businesses can be a good place to start. Leveraging suppliers within your existing network is another powerful way to connect with underrepresented suppliers. The best way is often through word of mouth, so collaborating with other organisations in your network can provide a wealth of knowledge including actionable and reliable information on various suppliers in your industry.
Invest in technology for long-term success
Implementing technology can help streamline your supplier diversity program so you can get the most out of your relationships. Comprehensive procurement software like JAGGAER ONE can help manage suppliers across the life cycle and provide visibility and analytics for key metrics like ROI and supplier spend. Beyond diversity initiatives, investing in technology can benefit your entire procurement function by providing greater security and control, as well as AI and automation capabilities to streamline functions.
Set goals, evaluate and evolve
Setting goals is critical to evaluating the success of your program and promotes accountability within procurement teams and the wider business. Benchmark against industry standards and competitors and continually monitor your performance. Supplier diversity programs should not focus on short-term wins, but must be designed with long-term success in mind. This means investing and improving your program over time so that you can grow a diverse network that provides value and benefits on both sides.
Supplier diversity is good for business and is moving up the corporate agenda with 70% of global organisations agreeing supplier diversity is a priority. By investing in diversifying the supply chain, organisations can reap a range of benefits. From a more agile and innovative supplier network to contributing to improved economic outcomes for communities, supplier diversity provides long-term value for everyone.