A business is only as good as its supply chain, and a supplier diversity program is only as good as the diverse suppliers it identifies and brings into that supply chain.
But what makes a good diverse supplier?
The criteria are much the same as they are for a good non-diverse supplier: fulfilling your requirements in an acceptable manner.
Obviously, as a supplier diversity professional, your goal is to find opportunities for diverse suppliers within your company’s supply chain, but that does not mean sacrificing value or quality.
A supplier diversity program is meant to increase access and remove obstacles for diverse businesses. It’s up to the suppliers to turn that opportunity into a contract by providing a product or service that meets your needs.
Successful partnerships are mutually beneficial. The bonus of partnering with a diverse supplier is that there are added benefits such as economic impact within the community, access to new consumer markets, and access to new ideas.
Keep in mind that what makes a good supplier for your company may vary depending on the circumstances. Let’s look at some further criteria you should have in mind when evaluating diverse suppliers, and how to make it easier to vet them.
What to Look for in a Diverse Supplier
Costs change, but quality is forever. You have standards of quality to uphold in your own products and services. Those standards require a certain level of quality from your suppliers. Test diverse suppliers at the same level you would any other to ensure your company’s competitive edge. A good supplier produces consistently high-quality goods and services. A good supplier also takes responsibility if quality is lacking, proactively communicates with the customer, and works to address the issue quickly.
Here’s where being a large customer of a small business can really pay off—small, diverse suppliers often offer bigger discounts than if you were a small customer of a large supplier. Cost savings coupled with innovative products and ideas can add up to higher revenues and increased market share. If your other criteria are met, this is definitely a win-win partnership!
Good suppliers know their limits and make promises accordingly. Can they meet your needs logistically? Are they able to scale to produce the quantities you need? Here is where diverse suppliers sometimes fall short. Because these suppliers are usually small businesses, they may not be capable of producing goods or services at the level your company needs. If this is the case, look for Tier 2 opportunities that are a better match for their capabilities.
You need your supply chain to run smoothly, so investigate how potential partners manage their business. What is their track record with other customers? What contingency plans do they have for natural disasters or disruptions in their own supply chain? Good suppliers want to do more than the minimum—they want to exceed their customers’ expectations. What kind of language and action do you see in this regard?
Location impacts cost and availability. Depending on your needs and the capabilities of diverse suppliers in your geographic region, partnering with a more local company can keep shipping costs down and speed up delivery. Additionally, doing business with a nearby diverse supplier has a positive economic impact on the communities where your own employees live and work.
An advantage you might find with small, diverse suppliers is their ability to shift quickly to meet changing demand or market trends. Because they are usually smaller operations, diverse suppliers are often more agile than their larger counterparts.
Agility can also translate to leadership within their field of expertise. Are they early adopters? Are they leading the way toward new technologies or best practices? Are they proactive and continually improving? These are characteristics of a good supplier and partnering with them could mean a distinct competitive advantage.
Forming new partnerships always involves risk and should be considered carefully. In the case of diverse suppliers, be sure you have up-to-date financials as well as current references, certifications (as a diverse supplier and any industry accreditation), insurance and liability coverage, and capability statements. Search news archives and social media to see what the media and customers are saying about them. Check that they are in compliance with industry rules and regulations.
A good supplier has established customer service protocols, effective communication, and a willingness to maintain a healthy relationship with its customers. As you’re vetting diverse suppliers, ask questions about their hours of operation, their policies on damaged or late goods, and how they handle emergencies. Good suppliers want their customers to look good!
Culture and Values Fit
Good suppliers have integrity and are compliant with regulations and rules for their industry. Their values and ethics should align with yours not only to make working together pleasant, but also to make it easier for you to trust each other. Of course, diverse suppliers may not have formal programs aligned with their core values, but they should have a values statement and demonstrate progress toward creating a culture that reflects those values. For example, a diverse supplier may not have a robust supplier diversity program of its own—it may not have one at all, yet—but it sees the value of a diverse supply chain and is working toward inclusive sourcing in its own company.
Unlike the other items on our list, this criterion is specific to diverse suppliers. As a company, you need to decide if you will only accept third-party certification or if you will also accept self-certification.
Many companies accept self-certification—44 percent of respondents to our 2019 survey do—but more and more are choosing to accept certification through third-party entities only. This decision is driven by a couple of factors: risk management and easier access.
When a diverse supplier is certified by organizations like the National Minority Supplier Development Council (NMSDC) or Disability:IN, you have the assurance that they were properly vetted and that the business is owned and operated by someone who qualifies as a minority or member of an underprivileged community. Not only does this mean your supplier diversity program is doing what it was built to do—work with diverse suppliers —but it also protects your program in case of an audit.
Additionally, these third-party organizations offer multiple opportunities to meet and interact with diverse suppliers throughout the year. Matchmakers, networking events, and conferences help you find diverse suppliers for potential partnerships while expending fewer resources. And as a CVM customer, you have access to our Supplier Explorer tool, which draws from CVM’s Master Database of millions of small and diverse suppliers, aggregating data from hundreds of third-party certification sources.
How to Vet a Diverse Supplier
The criteria for evaluating diverse suppliers is similar to how we evaluate non-diverse suppliers, with just a few exceptions. Those exceptions are crucial, however, particularly when it comes to certifications and capabilities.
Vetting potential suppliers manually is a time-consuming process; anything we can automate saves valuable time and resources for what is generally a small supplier diversity team.
When you know what you’re looking for in a diverse supplier, how can you quickly and efficiently find a potential match? CVM’s Supplier Registration Portal is a fully customizable tool that allows you to ask suppliers for the information that matters to you.
Using an RFI-styled questionnaire that you design, potential suppliers complete a prequalification sourcing survey within the registration tool. You receive the information that’s important to your company, then that information is verified against CVM’s Master Database.
The surveys can be scored and then routed to an appropriate buyer automatically if desired, eliminating another step in the process.
Finding good diverse suppliers doesn’t mean reinventing the wheel. Your goal is to remove obstacles to access and opportunity, then evaluate diverse suppliers using the criteria that are important to your company and your circumstances.
When you have identified those criteria and implemented tools to streamline the process, adding good diverse suppliers to your supply chain becomes much easier.