Have you ever been asked the question: Are corporations limiting their supply chain to only diverse suppliers?
If you're reading this, then interacting and engaging with diverse suppliers is probably a part of your job description.
We supplier diversity professionals spend a lot of time talking about, thinking about, and working with minority and underrepresented businesses.
We also spend a fair amount of time explaining the concept of supplier diversity and why it's vital to corporate growth.
Given the focus of our professional attention, the resources we manage, and our very jobs, it might seem to outsiders that corporations are only interested in working with diverse suppliers.
Of course, we know differently.
Despite decades of work increasing minority-owned businesses’ access to opportunities and striving toward business equality, diverse suppliers still make up only a small percentage of annual spend in every industry.
The Billion Dollar Roundtable (BDR) was created in 2001 to recognize and celebrate corporations that achieved spending of at least $1 billion with minority and woman-owned suppliers.
To date, BDR boasts 28 members.
In other words, only 28 companies in the United States have achieved $1 billion in spend with diverse suppliers, out of trillions and trillions of dollars in overall corporate spend.
So the short answer is, no, corporations are not solely doing business with MBEs, WBEs, LGBTBEs, and other diverse-owned firms. However, more and more companies are realizing the value of adding diverse suppliers to the supply chain.
It’s not about affirmative action, political gain, or quotas. Social responsibility is part of but not the driving force behind supplier diversity.
Smart CEOs recognize that expanding the supply chain to include diverse businesses reaps rewards for all stakeholders in five key areas.
Innovation & Agility
The late Trevor Baylis, inventor of the wind-up radio, once said, “The key to success is to risk thinking unconventional thoughts. Convention is the enemy of progress.”
A supply chain consisting of the same firms you've been working with for decades is conventional. It may be steady and reliable—barring bankruptcy, a merger, or mismanagement under new ownership—but where is the innovation?
How will you keep your product or service relevant as consumer demands change?
How will you ensure a stream of new product and technology development?
The supply chain for producing rotary phones was solid, but that didn't prevent them from becoming obsolete in the face of the brash new technology that produced the push-button phone.
MBEs and WBEs bring a fresh perspective to the table.
Innovative ideas and techniques, along with the ability to change course quickly to take advantage of trends and new technology—that's what a diverse supplier can offer your company.
Cost Reduction & Competitiveness
With innovation comes increased competitiveness, both for your company in the marketplace and within your supply chain.
Suppose Company A has been providing you with gizmos for decades. These gizmos do the job, but haven't changed in design, and Company A hasn’t made any changes to the manufacturing process.
Why should they? If it ain't broke, right?
Then along comes Company B, a woman-owned business that makes the same gizmo.
Thanks to an innovative, streamlined manufacturing process, the cost of producing the gizmo is 15 percent less than with Company A.
By offering Company B the opportunity to win your business, you have the potential to reduce your production cost and increase profits.
Supplier diversity is good for consumers, too.
By strategically diversifying suppliers, you create a competitive atmosphere, keeping prices low while bringing in new and exciting products to attract consumers.
Of course, not every MBE or WBE will be able to offer cheaper or better products and services.
But without a supplier diversity program that facilitates an inclusive bidding process, how will you know if those options exist?
Expanding the Customer Base
Millennials and Generation Z are the most diverse population groups in our nation's history, meaning the consumer base is becoming increasingly diverse.
To meet the demands of this emerging market, you need new products and services, and often the people developing those new products and services are minorities themselves.
When your supply chain reflects your consumer base, you are more likely to meet the needs of those consumers.
Social responsibility and reputation fall under this key point as well.
These customers care what the companies they buy from do and how those decisions impact their communities, thus connecting market diversity to supplier diversity, and supplier diversity to revenue.
Eligibility for Federal Contracts/Compliance
The U.S. Government is the largest buyer of goods and services in the nation. According to the U.S. Small Business Administration (SBA), “Purchases by military and civilian installations amount to nearly $500 billion a year, and include everything from complex space vehicles to janitorial services.”
Fortunately, the federal government is also committed to supporting diversity, allotting a certain percentage of federal contracting dollars to spend with small- and minority-owned businesses: small businesses (23%), women-owned small businesses (5%), small disadvantaged businesses (5%), service-disabled veteran-owned small businesses (3%), and HUBZones (3%).
In addition, large, non-minority manufacturers awarded government contracts are required to utilize diverse suppliers as subcontractors when contracts reach a certain value..
If you are working with the government, or would like to, supplier diversity needs to be on your agenda.
This emerging metric is proving to be a powerful indicator of how supplier diversity impacts local communities, as well as the national and global economies.
The benefits of knowing your economic impact are plentiful.
For example, when your company conducts an economic impact analysis, you and your peers might be surprised to learn how your supplier diversity efforts have led to increased employment.
How, you might ask, could your program help the employment rate?
When using diverse suppliers, the revenue you provide has the tendency to enable growth within those companies.
And, of course, when they grow, more people are needed to handle the increased workload.
Besides the increased disposable income you great - which can then be trickled back to you - this employment impact can be a powerful advertising tool for your organization.
That’s just one of the many benefits of economic impact.
From job creation to supply chain sustainability to increased tax revenue, doing business with diverse suppliers creates an exponentially larger economic impact than doing business with large, non-minority-owned firms.
You, the supplier diversity professional, have seen these benefits of working with diverse suppliers in action.
You've read the reports from other companies engaged in best practices.
You may have seen your competitors increase market share as a result of partnering with an innovative MBE or WBE.
Your company doesn't have to work with only diverse suppliers to reap these rewards, but savvy leaders know that a diversified supply chain is key to sustainability and profitability.
How have your diverse suppliers helped your organization excel?