Benefits of Supplier Diversity

Benefits of Supplier Diversity

What is supplier diversity?
While there isn’t a national standard, examples of diverse suppliers include: minority-owned businesses certified by the department of general services, disabled veteran owned firms, LGTBQ owned enterprises or state certifications such as the California Public Utilities Commission for woman owned companies. Certification may not always be required, but most large corporations prefer documentation to avoid fraudulence.

How can it help your business?

  • Drive competition
  • Meet customer expectations
  • Promote flexibility of services
  • Improve process diversity
  • Encourage local community economic development
  • Boost employee retention and recruitment

Growing Significance
Supply chain transparency is becoming more important to consumers, causing it to become a marketing feature. Over the last decade, consumers have demanded more information about corporate supply chains and how products are sourced. Blockchain has also allowed for companies to be more transparent when sourcing products from other countries where supply chain issues have occurred.

Using local suppliers helps keep money in the community along with supporting local jobs. A 2017 study by the Hackett Group revealed that companies with 20% or more spend with diverse suppliers can attribute up to 15% of their annual sales to their supplier diversity programs.

Goal setting
Supplier diversity metrics vary from industry to industry. Many companies strive for 8-12% of spend with diverse suppliers while other industries such as utilities can be as high as as 40%. The government has also been a big proponent of diverse spend with target rates between 20-30%.

After setting goals, it is important to track results to see year over year trends. Companies like Walmart provide Global Responsibility Reports detailing their supply chain spend and responsibility. Soon, this may become common place or required since most companies have the data and investors have begun demanding access to the data. Once this occurs, tier 2 spending will be the next focus among corporations and investors.


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