Increased focus on supplier diversity is the way to go

By Charles Nyika | Apr. 26, 2024

The concept of supplier diversity should never be regarded as a business catch phrase nor should it be regarded as a mere act of charity. Over the years, there has been a growing welter of evidence that seemingly point to the manifold benefits of relying on a diverse supply chain network.

DIVERSITY has become a buzzword in recent times. Statistics from previous multiple studies seem to suggest that the world population is increasingly growing diverse at every turn of the decade.

Similarly, the workforce of many corporate giants is seemingly growing diverse. It, therefore, follows that supplier diversity is the way to go.

A supplier diversity programme ordinarily emphasises the active use of minority-owned, women-owned, disabled-owned businesses and historically underutilised business entities.

Supply chain professionals are fully aware that the benefits of being diverse are just too significant to be ignored.

The business community has come to terms with the fact that supplier diversity is “the right thing to do” for business. It has since become a strategic imperative rather than a vaguely defined moral obligation. However, for others, supplier diversity appears a seemingly strange elusive goal, particularly for those that always attach financial value to anything and everything.

It, therefore, follows that the ‘old guard’ corporate leaders who often see everything in dollars and cents could view supplier diversity as a hard sell.

But supplier diversity advocates will tell you that seeing dollar signs at every turn of the handle is retrogressive, at best, and value destroying, at worst.

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This will inevitably bring out an outpouring of mixed feelings that result in negative connotations about the value of supplier diversity. Lack of executive support could easily bring the unintended consequences of obscuring well-meaning thought processes of what supplier diversity stands for.

The reality is that over the years the minority-owned, women-owned businesses and historically underutilised suppliers have grown in numbers and capacity. As supplier diversity initiatives continues to trend, most business leaders begin to acknowledge that it is probably the best time to start turning their heads and noticing.

The clarion call is for corporate leaders to craft strategies that incorporates the use of minority-owned businesses at the core of their organisational culture, beliefs and business practices.

Those supply chain professionals, who are socially conscious and socially responsible will always seek to level the supply chain playing field by promoting an inclusive approach to supply chain management practices.

Such kind of inclusivity will assist in setting the tone for institutional commitment to supplier diversity by other players in the chain.

The use of local and diverse suppliers needs no justification. It should grow out of the business’s deepening desire to play an inclusive role by doing what is considered right. Apart from that, the minority-owned and or small businesses are well-known for creating jobs in the local communities they are located.

The jobs that will be created will inevitably lead to an increase in the purchasing power among the locals. This will obviously promote the most perfect opportunity to significantly contribute to the aggregate wealth of the locale.

Both the minority owned businesses and the local community will get an opportunity to share the collective wealth that is generated from the local resources.

It is common knowledge that those communities that are not supported by supplier diversity programmes could easily remain poor with the attendant increases in crime and social instability.

Supplier diversity programmes are also well known for creating a conducive playing field for upcoming entrepreneurs that may ordinarily struggle to compete with those from the ‘big tent’. Such programmes will create a more equitable business landscape where all vendors are treated with equal opportunities and respect.

The inclusive modern supply chain practices are, therefore, often renowned for delivering broader societal benefits by creating open economic opportunities for the traditionally disadvantaged suppliers.

Embracing supplier diversity programmes is also an indirect way of contributing to an organisation’s civic duty and corporate social responsibility.

The feel-good effect of being a model corporate citizen is important. Buying organisations will, therefore, show their full commitment to supplier diversity programmes as a testament of their responsibility as a corporate citizen.

The concept of supplier diversity is, therefore, regarded as an “inclusive imperative”, which is closely associated with the mission of bringing goodness to the world in which we do business.

It is an organisation’s heartfelt dedication to those suppliers that are generally looked down upon. It allows organisations to stay firmly connected to those suppliers largely regarded as non-mainstream, while at the same time contributing to economic development in the communities that they operate. This, for all intents and purposes, demonstrates an organisation’s ready commitment and willingness to honour the social contract. It probably reflects, in large measure, the basic tenets of responsible supply chain management.

The adoption of supplier diversity programmes will, therefore, reinforce the reputation of an organisation as a socially conscious corporate citizen. Supplier diversity programmes could also serve as part of a company’s efforts to maintain high moral and ethical standards in the eyes of those around its environs.

Such well-meaning initiatives are slowly being regarded as intrinsic markers in the organization’s moral worth. Supply chain professionals must therefore dedicate long hours coming up with supplier diversity frameworks since they are often regarded as proxies for corporate social responsibility programmes.

Despite the disquiet of what supplier diversity represents, the business case for such programmes is undeniable. A diverse set of vendors provides the capacity to generate immense brain power to contribute for the development of novel ideas for the quick adaptation to the dynamic market changes and fluctuation of the business environment. Small vendors may have fewer tools in the toolbox, but they are resourceful in using those tools to solve diverse challenges. Small suppliers are less likely to be tied down by restrictive trading terms and conditions, red-tape or innovation stifling bureaucracy.

Upcoming entrepreneurs could be handful especially in cases where there is an urgent requirement to augment inventory levels, particularly in situations where big suppliers ordinarily insist on large minimum-order quantities.

This will obviously make it very easy for business organisations to easily respond to changing market trends and customer demands. Supplier diversity programmes will, therefore, create adaptive advantages in the face of constant change and volatility.

Supplier diversity programmes can also facilitate and support competitive bidding programmes, which are by their nature prolific sources of competitive prices.

In pursuit of competitive prices, a varied set of suppliers should be a default position for sourcing. It can trigger a competitive mindset, with non-mainstream suppliers eager to prove their worth. It is an opportune moment to face head-on past inequities in supplier participation by previously disadvantaged members of society.

The legacy thought processes that often associate big suppliers with better products is just one of the many myths. After all, size does not always determine value.

There is no need to sell your organisation short by confining your supply chain sources to those so-called major suppliers.

An inclusive supply chain strategy widens the pool of potential suppliers and promotes competition in the supply base, which can improve product quality and drive down costs. And by creating more supply sources, inclusiveness through supplier diversity can assist in crafting supply chains that are more resilient, robust and agile which happens to be a significant commercial advantage in today’s uncertain business environment.

The use of diverse vendors will assist the business in fortifying the supply chain competitive advantages in an era of escalating disruption. The disruptive trading landscape will dictate the requirement for equally disruptive strategies. It is now more important than ever for organizations to infuse minority owned suppliers into their mainstream supply chains in order to gain and maintain a long-term competitive edge.

Supplier diversity programmes could be utilised for penetrating new markets. As an organisation expands its supplier reach through supplier diversity, there is an off-chance possibility of reaching out to new market segments as well.

Upcoming vendors are well known for operating anywhere and everywhere with anyone and everyone. They take pride in having a diverse business network.

In the process, these so-called small suppliers have got the capacity to promote your company’s products. Obviously, those suppliers that are contracted through supplier diversity initiatives will develop an entrenched loyalty to the organization that will have given them the business opportunity to prove their worth.

Suppliers, the world over, are ordinarily proud of their valued customers. They promote their supplier’s products freely and for free. Obviously as globalisation increases, we are likely to continue seeing the development of many diverse market segments.

Said differently, organisations will see supplier diversity as a reputation-builder to assist in opening the door to a field of infinite possibilities while at the same time growing the wallet share of the business.

The organisation will obviously profit from gaining fresh perspectives and opportunities to gain a foothold in previously untapped green market segments.

As the organisation reaches out to more suppliers, they will become privy to each of the business networks of those who constitute their supply chain network. The most promising opportunity to explore new markets could therefore easily lie within supplier diversity.

There is an endless sea of possible opportunities from diversified market segments. Companies seasoned in supplier diversity are positioned to reap first-mover advantages of brand loyalty and increased profits.

The rapidly changing demographics has also significantly changed the homogeneous market that we have always been accustomed to over the years.

To overcome homogenous thinking with fresh new perspectives, diverse suppliers will play a big role. Organisations can take advantage of new opportunities for business expansion by keeping in step with shifting demographics. It has soon become apparent that many organizations are being forced to adapt to the rapidly changing world demographics.

Supply chain diversity could easily play a pivotal role in capitalising on the expanded opportunities resulting from such demographic disruptions. Supply chain professionals must be seen to be recasting their value propositions with a broader view of minimising the potential impact of disruptive demographics.

As is often said, “a more diverse supplier base means an organization is much more likely to be a reflection of the customer it serves”.

My closing thoughts. When done properly, supplier diversity programmes are vital and could easily rewrite the rules of the game with a view to shape a new and better future.

In truth, diversity is a mindset and to some extent cultural in nature. It is not a one-time checklist that requires a tick-box approach. It appears as prevalent as ever that in some cases supply chain diversity issues are often viewed as a thumb in the eye to many. But supplier diversity means doing the right thing for the right reasons. As we continue to reflect, supplier diversity programmes have come of age.

The situation is far from hopeless despite the odds. These diversity programmes have significantly risen in corporate priority and could potentially generate a lasting influence that will enable value to accumulate over many years to come, putting organisations in positions of great potential.

For now, the use of supplier diversity programmes remains largely nascent, but the future potential remains promising. It should not be something that organisations just do because it sounds good or feels good. It is the right thing to do.

It is a good faith effort. But not only that. Some say it spreads the equity in wealth. Quite frankly, there are no right or wrong answers. Such issues will frequently be raised up for debate in corporate conversations and in most cases, the answer will depend on who is asked.

While supplier diversity has come this far, it looks like it still has so far to go. It is crystal clear that the long road to supplier diversity perfection is winding and will continue to wind. Supply chain professionals are therefore expected to go beyond the normal call of duty to convert a feel-good nostrum to a strategic imperative as supply chains trudges along the meandering road to excellence. In other words, with a cause big enough, it is doable. It can be done. It shall be done.