Supplier diversity programs are gaining more attention from businesses looking to increase their social responsibility, but enhancing inclusion initiatives and developing a diverse vendor base isn't just about being able to demonstrate sound ethics.
Minority-owned businesses, or MOB, are rapidly expanding. According to the United States Census Bureau, between 2007 and 2012 the number of minority-owned firms in America grew from 5.8 million to 8 million. And because traditionally underrepresented groups are obtaining increased economy share, they present organizations with the opportunity to improve their bottom line and gain a competitive advantage.
Supplier diversity benefits and trends
As CVM Solutions pointed out, by tapping into the pool of underutilized suppliers for the procurement of products and services, you're able to:
- Position your company as an equal opportunity employer
- Access greater contract opportunities
- Drive innovations with new services and products
- Help strengthen the economy and support the economic growth of all groups
- Appeal to consumers becoming increasingly demanding of social responsibility
- Cater to the needs of shifting demographics and emerging markets
To best optimize your supplier diversity initiatives, it is important to consider what direction the segment is headed in. In an article for Wharton Magazine, Rod Robinson recently highlighted some of the trends and predictions transforming supplier diversity programs. He said it likely won't be long before publicly traded companies will be required to disclose the data that reveal how effective their programs are.
Robinson also indicated that being forced to reveal more information will usher in increased scrutiny, thus adding to the pressure put on organizations to improve the quality, accuracy and performance of suppler diversity programs.
However, even if your company recognizes the value in supplier diversity programs, effectively implementing and executing one can be challenging. Some companies are limited in their access to a diverse crowd of suppliers. Others don't have the resources or capabilities that allow them to effectively find, vet and maintain a strong and dynamic network of vendors. And of the businesses that do have a supplier diversity program in place, many are not adequately measuring the performance of them. If you're only goal in diversifying the supplier base is to meet government requirements and remain compliant, you are not maximizing the potential of its success. Below are some tips for making the most of your supplier diversity program.
"Many companies are not maximizing the value of supplier diversity programs."
Get all hands on deck
Making the commitment to elevate supplier diversity needs to happen at all levels of the company. Your business, from the C-suite down, needs to understand the importance of these initiatives and view it as a priority. But in order for this to happen, it is imperative that corporate leaders see how it is beneficial for all involved parties, not just certain groups.
Identify and quantify specific goals
It's nearly impossible for you to accurately assess the effectiveness of a program and how successful its performance has been if you don't know what you're measuring it against. What are the specific goals of the company? What qualifies as a success? These goals should be quantified and treated as other key performance indicators and metrics.
To further improve the financial gains of the supplier diversity program, you could conduct an internal evaluation or survey other partners about what some of the advantages and issues of working with your company are. Being aware of this information can help you identify which areas must be prioritized, and it allows you to enhance the chances of other diverse suppliers wanting to work with you. Having a bigger pool of options to choose from can lead to cost-saving opportunities.
Assess the value of each supplier
Just because a supplier adds to the diversity base, doesn't mean it is necessarily going to contribute the success of your organization. As with any business partnership, it is critical that the company is evaluated to determine how much integrity, credibility and quality it possess.
"Diversifying your supplier base is about more than just meeting a quota."
Your supplier diversity program needs to about more than simply meeting a quota. The success of it is not based on how many diverse vendors you can add to your network, or at least it shouldn't be. Rather than focusing on the number of suppliers, measure how much value they bring to the organization. For example, how much of the procurement budget is being allocated to diverse suppliers?
Leverage certified partners
Another way you can improve the quality of your supplier diversity program is by vetting potential firms through experienced third-party consultants. For smaller firms, as well as larger corporations that don't have the talent, time, resources or skills to dedicate to developing and maintaining the program, consulting companies can help them tap into a bigger pool of diverse suppliers.
Working with a consultant that is certified by the National Minority Supplier Development Council will allow you to streamline your supplier diversity initiatives. Not only will they be able to connect you with quality vendors that can provide your organization with the necessary value you're looking for, but they can also ensure that each supplier will count towards your diversity quota.