Gaining the support of key stakeholders within your organization – executives, shareholders, employees – is crucial for the success of your supplier diversity program. Establishing the business case for supplier diversity requires educating stakeholders on the benefits, demonstrating how your program's goals align with the organization's strategic objectives and real benefits that go beyond meeting supplier spend quotas.
Explain key trends and statistics
America's demographics are evolving rapidly – according to the 2012 U.S. Census Bureau, minorities represent 35% of the total U.S. population and are expected to become the majority by 2043. Asians and Hispanics together accounted for two-thirds of total economic spending growth from 2013 to 2014. In addition to buying power, minority-owned businesses are growing faster than any other ownership group.
According to a report commissioned by the National Minority Supplier Development Council, diverse suppliers certified by NMSDC have a total economic impact of over $400 billion dollars in output annually, resulting in the creation of and/or preservation of more than 2.2 million jobs held by persons who find themselves either directly or indirectly employed by NMSDC-certified MBEs.
These numbers will only increase in the future, and by integrating diverse suppliers into your company's supply chain, you stand ready to embrace an expanding market as well as benefit from agile, innovative firms.
Make the numbers relevant
In the last few years, supplier diversity has moved from being measured and evaluated solely on achieving spend goals to being measured by the program's impact on the entire organization. Review your supplier diversity program's goals and insure that they are relevant and aligned with the company's strategic objectives, such as growing revenue, reducing costs, reducing risks and increasing overall shareholder value.
A supplier diversity program benefits the company because it:
- Promotes innovation through the introduction of new products, services and solutions
- Provides multiple channels from which to procure goods and services, alleviating supplier dependencies
- Drives competition on both price and service between the company's existing and potential suppliers
- Allows your company to take advantage of new opportunities presented by shifting demographics
- Displays your organization's commitment to doing business, beyond consumerism, in diverse markets
- Showcases your company's interest in and commitment to the economic growth of all communities
When you link supplier diversity goals to your organization's core business drivers, it demonstrates how the program aligns with the rest of your company's initiatives, and not just driven by quotas.
A third party can assist you with defining the ROI for your supplier diversity program and presenting the program to executive staff to achieve buy-in.
Go beyond tracking spend
Demonstrate how your supplier diversity program not only supports but drives business growth and increases shareholder value by going beyond traditional metrics. Quantitative metrics such as amount and percentage of diversity spend alone cannot paint a complete picture for stakeholders, so consider measuring other metrics that show how diversifying the supplier base benefits your organization. For example, many companies find that their supplier diversity program results in enhanced brand loyalty, adding key strategic suppliers who inspire innovation, driving down costs due to increased competition among suppliers and/or supporting the organization's workplace diversity initiatives.
Combine Tier 1 spend analysis with data enrichment to generate the most up-to-date reports, track the growth of your supplier diversity program and increase your organization’s diverse utilization through regular supplier data enrichment projects.
Supplier diversity is good for business. Integrating diverse suppliers into the supply chain breeds innovation and competition, driving down costs and increasing shareholder value. Demonstrating how an effective supplier diversity program aligns with your organization's strategic goals and drives business growth encourages buy-in from key stakeholders, leading to economic success.