The supplier diversity function has had an illustrious history in American business. The idea of supporting minority business enterprises began to materialize the late 1960s and early 1970s amid the civil rights movement, and the function has grown and evolved since as a focal point of corporate America. Milestones along the journey have included the development of third-party certification organizations as a means for assuring minority business status, as well as the inclusion of other ethnic and demographic groups under the supplier diversity umbrella to include women, lesbian, gay, bisexual, and/or transgender (LGBT) individuals, service veterans, and disabled people.
Early on, to satisfy the needs of the supplier diversity function, corporations set up dedicated teams of supplier diversity professionals that would operate virtually independently within the company. These teams, typically consisting of a supplier diversity director along with other managers and support staff, were keepers of their own budgets and responsible for devising initiatives to bring qualified diverse businesses into the corporate supply chain. These directors and managers were innovators as well, largely responsible within their companies that saw the notion of supplier diversity shift from one of a feel-good altruistic process to one of a business imperative. They were instrumental in showing senior executives responsible for funding initiatives that diverse suppliers were agile, inventive, and highly engaged sourcing partners who could bring business value to the organization.
Yet as with any business function, priorities tend to shift over time, and the supplier diversity function is no different. A number of emerging trends started to occur around the mid-2000s that, in effect, began a rethinking of the supplier diversity function. First, corporations began to consolidate their domestic supply chains as a means for creating efficiencies and reducing costs. Affecting not just diverse suppliers, corporations sought to reduce the numbers of direct suppliers within their supply chains, seeking savings in human resources and bureaucracy.
Meanwhile, supply chain consolidation led in part to the rise of the Tier 2 sourcing platform, in which many smaller suppliers, including diverse suppliers, would be attached to the company’s larger prime suppliers for diversity spend purposes. Because of the nature of Tier 2 reporting, in which many more suppliers must be accounted for, some corporations outsourced that reporting function to managed services providers to create supply-chain savings. In addition, as corporations were seeking to operate more tightly domestic supply chains, they also were confronted with the need to expand sourcing globally to meet the demands of global competition.
All of these factors began to propel that shift in thinking by corporations about the supplier diversity function. Though senior executives remained committed to the business value achieved by including diverse suppliers in their supply chains, some also have considered whether a dedicated supplier diversity function would be necessary going forward. Some of the thinking that has emerged is that the supplier diversity function could be handled best by the entire supply chain, rather than operating as its own detached function.
Some procurement executives have long advocated for this within their companies, arguing that supplier diversity is an activity within the company that all supply-chain professionals should be engaged. If supplier diversity has reached the point to where it is a fundamental business activity, then a dedicated unit would not be needed, they have argued, citing the perpetual concern corporations have with utilizing most effectively their limited employee headcount.
Many long-time supplier professionals at Fortune-level corporations are concerned that a number of companies indeed are re-deploying both supplier diversity resources and professionals away from a dedicated function. In some instances, they are describing situations in which supplier diversity professionals are being furloughed because a dedicated function no longer exists.
Going forward, these are questions that both corporations and supplier diversity professionals will grapple with. In addition, many advocacy organizations that support business opportunities for diverse enterprises are discussing ways to perhaps redefine the supplier diversity function while offering guidance to corporations seeking to reduce their direct supplier diversity emphasis. Many believe that the redefinition should emphasize the benefits supplier diversity brings in the areas of community and economic development, thus showing that diverse suppliers not only are successful corporate business partners, but also are creating jobs and wealth in their local communities as their businesses grow.