A continual challenge that supplier diversity professionals face is demonstrating the value their programs offer to their organizations. Diverse spend is an obvious measurement, but some execs might think the money spent on supplier diversity doesn’t make a difference—that cost will go to one vendor or another, so why put extra effort into pinpointing diverse suppliers?
Supplier diversity is much more than spend statistics and good public relations. It can create real opportunities, not only for the diverse businesses you contract, but also for the bottom line of your organization. The C-suite may be on the fence about your program’s mission, but it shouldn’t have any problem appreciating concrete, profitable results. Here is a look at some of the opportunities supplier diversity programs create for their organizations:
More Suppliers to Choose From
Your company needs suppliers to be successful, but finding a qualified pool of suppliers, especially in certain industries and areas of expertise, can be a challenge.
Supplier diversity programs offer a way to expand your pool of suppliers and, ultimately, strengthen your supply chain.
For example: You need to replace a key supplier. The process for finding a new one can take time as you research and vet possible candidates. However, thanks to supplier locator tools and certification agencies, supplier diversity programs have access to a range of vetted, established vendors to get the process rolling.
This flexibility eliminates some of the research needed to contract new suppliers, finds vendors who are enthusiastic about delivering great work for your company, and of course, increases those ever-important diverse spend numbers.
Along the same lines, supplier diversity provides procurement and other parts of the contracting organization opportunities for referrals that more efficiently strengthen their vendor portfolios.
In our 2018 State of Supplier Diversity Reports, 53 percent of responding supplier diversity professionals say that one way they locate diverse suppliers is through other diverse suppliers. Smaller suppliers are more likely to refer diverse suppliers in other industries than a giant vendor would.
Moreover, diverse suppliers won’t hesitate to recommend you, their trusted partner, to other businesses, thus creating more avenues for you to increase diverse spend.
The opportunity to secure government contracts is a powerful driver of supplier diversity programs.
Often, these contracts require a certain percentage of diverse spend, so organizations that struggle finding diverse suppliers are at a disadvantage.
Some state and federal tax incentives also require a commitment to contracting diverse suppliers—this is an easy benefit to a company’s bottom line if the required spend can be achieved.
Increasingly, Tier 2 diverse suppliers—essentially, your vendors’ vendors—can be counted toward diverse spend. Tracking Tier 2 takes some extra effort, but with the right solution, this spend can open up lucrative government opportunities.
A diverse supplier base gives you plenty of options to manage all suppliers as well as your organization’s procurement needs. Creating a larger supplier pool also creates competitive pricing with vendors.
With these benefits in mind, a robust supplier diversity program can be wildly cost-efficient—you aren’t spending as much to find suppliers, the diverse suppliers you already have are less likely to leave, and your thoroughly vetted supplier portfolio has a proven track record of success.
How Consumers Value Supplier Diversity
In our soon-to-be-released report, we asked diverse suppliers whether an organization having a supplier diversity program influences whether they will buy from that organization. About 36 percent of respondents said it was a strong influence, and another 46 percent cited at least a slight influence.
Although this result is just with the suppliers themselves, you can bet that a decent-sized segment of consumers also value a company’s commitment to diversity.
A supplier diversity program opens new opportunities for customers to support your organization and recommend it to others. That kind of impact may not be immediately measurable, but it’s the sort of success that makes your supplier diversity program all the more worthwhile.
What opportunities have your supplier diversity program created?