Have you heard the phrase “supplier diversity” but are unsure what it means? The definition and application of the phrase, like with many business terminologies, might vary by business.
Let’s start with a broad description and then delve a bit further.
What is supplier diversity?
Supplier diversity is a business strategy that promotes a diverse supplier base in the procurement process of a business. In other words, supplier diversity refers to a supply chain that incorporates businesses owned by diverse individuals or groups.
In short: Supplier diversity refers to a supply chain that includes enterprises owned by diverse persons or groups.
What is a diverse supplier?
In the broadest terms, a diverse supplier is a business that is owned and operated by an individual or group that is part of an underrepresented group. Examples of diverse supplier groups include: LGBT, ethnic minorities, veterans, disabled and more. In the USA, there are about 16 categories of diverse suppliers.
In 2022, Monumental was accredited as an LGBT corporation by OutBritain and the NGLCC. This accreditation verified that Monumental is majority owned (51% or more) by LGBTQ individuals.
Diverse certification is a significant milestone in the life of a supplier (Like us!) since it confirms that the company is owned, managed, and controlled by a qualified diverse group. Certification also opens up the possibility of contracting with the federal government, which aims to enhance the number of diverse suppliers in an organisation’s supply chain.
Why does it matter?
Supplier diversity promotes innovation through the introduction of new products, services, and solutions. It also expands a buyers’ choice of channels from which to procure goods and services. From a financial perspective, it drives competition between the company’s existing and potential vendors.
Why should businesses prioritise inclusive supply chains? The motivations range from social responsibility to profit. Ideally, supplier diversity blends the best of our wishes for a better, more fair world with the ambition to be a market leader.
Five reasons why you should prioritise supplier diversity
- Supplier diversity benefits underrepresented communities and businesses
Diverse suppliers, which are often smaller businesses, have a large impact on the communities in which they operate.
Supplier diversity not only benefits underrepresented businesses, but inclusive procurement also has greater societal advantages by providing economic opportunities to underserved populations.
The communities in which those firms are situated through job creation, higher pay, and tax income. This is known as economic impact, a statistic that shows how important supplier variety is to local economies and communities.
- Supplier diversity adds economic value
To begin with, supplier diversity programming delivers economic benefits by encouraging the growth of diverse enterprises.
Diverse businesses frequently face challenges to establishment and sustainability, such as access to funding and networking opportunities, and good supplier diversity policies may ease these pain points.
- Supplier diversity improves supplier competitiveness
Adding various vendors to the possible sourcing pool can assist promote contract competition, which can improve quality and reduce prices. More sourcing alternatives can help improve supply chain resilience and agility, which is especially crucial in unpredictable times. If a company’s supply chains are disrupted in one region of the world, it can easily switch to different suppliers.
- Supplier diversity attracts and retains top talent
A Supplier Diversity Program is an important component of a larger corporate responsibility programme that assists a business in attracting talent.
Consumers appreciate the corporate purpose and associated behaviours in the businesses they buy from, and employees value the same in the organisations they work for.
Top talent, particularly those who are younger and more socially conscious, prefer to work for organisations that value diversity and inclusion. A culture of equality fosters a willingness and capacity to innovate and is a significantly more powerful driver of an innovation mindset than money alone.
- Supplier diversity boosts innovation.
Every company’s lifeblood is innovation, and many organisations are increasingly looking to their suppliers as fresh sources of innovation. Bringing in various suppliers enables a company to tap into fresh mindsets, viewpoints, and ideas.
Diverse suppliers can not only co-innovate with their customers if done right, but they can also adapt and scale up quickly, allowing customers to implement innovations quickly. This expedites the introduction of new capabilities to the market while also assisting in the achievement of business objectives.
Supplier Diversity Programs
Entities providing supplier diversity programs, like OutBritain, for example, focuses on ensuring that enterprises are properly classified by providing nationally recognised third-party certification services.
- What is OutBritain?
OutBritain is the first LGBTQ Chamber of Commerce, connecting, supporting and growing the LGBTQ business community across the UK and connecting it to the rest of the world.
- What is the NGLCC?
The National LGBT Chamber of Commerce in the USA recognised as the business voice of the LGBTQ community. The NGLCC is the largest advocacy organisation dedicated to expanding economic opportunities and advancements for LGBTQ people, and the exclusive certifying body for LGBTQ-owned businesses.
Many organisations are expanding their involvement in combating social concerns and issues.
Treating diversity and inclusion goals as an integral aspect of a company’s procurement strategy may help unleash value that goes far beyond standard supplier chain cost reductions, such as enhancing competitiveness and innovation, developing customer loyalty, recruiting talent, and also bettering society.
It has been demonstrated time and again that when companies diversify and empower others, they rise together.
That is why supplier diversity programs must go beyond talking and ticking boxes to take actual action.