Is Supplier Diversity an Effective Tool for Business Growth?
CHICAGO - Businesses that have robust supplier diversity programs report that they see improved quality and often extract other business benefits, including increased market share and access to new revenue opportunities (The Hackett Group, 2017). Companies and organizations that take the time to properly implement a supplier diversity program are in a better position to penetrate new market segments and gain new customers.
What is Supplier Diversity? Supplier diversity is a business program encouraging the process of sourcing products and supplies from minority-owned, women-owned, veteran-owned, LGBTQ-owned, service disabled veteran-owned, historically underutilized businesses, and SBA-defined small business vendors. Some companies create supplier diversity programs to meet customer mandates, to leverage governmental initiatives or to comply with federal supplier requirements. What these companies eventually determine is that, in addition to these benefits, robust and well-designed supplier diversity programs can be instrumental in improving a company’s bottom-line and can impact more than spending.
Promoting Innovation through Supplier Diversity Smaller diverse businesses are agile and can implement change and innovation more quickly than larger, more established suppliers. Companies that continually use the same supplier network risk losing creative benefits that can be gained by seeing the depth of innovation that can be represented by a more diverse supplier base. Diverse businesses can also provide solutions for customer acquisition in more diverse markets. The knowledge base that diverse businesses can bring to a business or organization expands opportunity by bringing new ideas to the forefront of your research and development, or marketing, teams. New ideas that the market wants to see can result in growth opportunities and increased profitability.
Value Advantage through Supplier Diversity Suppliers want to give you the best deal that they can to win your business. By expanding your network of suppliers for similar products, you are engaging the supplier network to remain competitively priced and to analyze and offer other service factors, such as location, depth of product offerings, quality and overall customer service, as a way of differentiating their value proposition to you, the buyer. According to The Hackett Group, companies with well-designed supplier diversity programs spent an average of 20% less on their buying operations and increased their overall return on procurement investments.
A Positive Tool for Growth and Economic Impact Suppliers who invest in certification hope to differentiate themselves as forward thinking companies who are a part of the shifting demographic profile in our country. Major corporations and organizations who partner with diverse suppliers can potentially receive additional benefits by applying their spend toward diverse supplier requirements required to bid and win federal contracts. Small, medium and large corporations who partner with diverse suppliers can produce significant impact in their local communities while creating jobs at the local and regional level. Supplier diversity is usually a win-win for all of the companies involved.
References The Hackett Group. (2017, 02 17). Research Alerts and Press Releases. Retrieved from The Hackett Group: http://www.thehackettgroup.com/about/research-alerts-press-releases/2017/02162017-top-supplier-diversity-programs-broaden-value-proposition.jsp
Joanne Tica is an organizational development strategist who works with growth oriented companies seeking tools, tactics and strategies to support continued growth. If you are interested in learning more about how a robust supplier diversity strategy can strengthen your company's growth curve, please contact Certified Impact by clicking here.