What Is Supplier Diversity and Why is it So Important?
Supplier Diversity is a business strategy that ensures a diverse supplier base in the procurement of goods and services for any business or organization. Supplier Diversity emphasizes the creation of a diverse supply chain that ensures the inclusion of diverse groups in the procurement plans for government, not-for-profits, and private industry. Statistics show that companies who embrace diversity are more profitable than companies who don’t.
“The reason diversity works is that on almost every measure, greater racially, ethnically, and culturally diverse workplace teams function more effectively than more homogenous teams. Members from diverse backgrounds, experiences, and perspectives avoid “groupthink,” whereas non-diverse teams get mired in it. …In short, the business case for diversity is overwhelming.”
What is a Diverse Supplier?
There are approximately sixteen categories used to identify diverse businesses. Common examples include Small Business Enterprise (SBE), Minority owned business enterprise (MBE), and Women Business Enterprise (WBE). In order to report diverse spend; it is important to ensure suppliers are certified.
Diversity Certification is an important milestone in the life of a supplier because it authenticates that the business is owned, managed, and controlled by a qualifying diverse group. Organizations such as the Women’s Business Enterprise National Council (WBENC) and the National Minority Supplier Diversity Council (NMSDC) focus on assuring that businesses are appropriately categorized by offering third-party certification services on behalf of private industry. State and local governments also offer certification services. Diversity certification by a governmental agency positions a supplier to do business in the public sector.
Why is Supplier Diversity important?
A common misconception is that diversity is a quota system or social program designed to benefit selected groups while adding little to no value to the bottom-line. The fact is that a competitive advantage exists, as progressive organizations who have already implemented an effective strategy have realized. A Supplier Diversity commitment benefits a company because it:
- Promotes innovation through the entrance of new products, services, and solutions
- Provides multiple channels from which to procure goods and services
- Drives competition (on price and service levels) between the company’s existing and potential vendors
- Allows a company to take advantage of new opportunities for business expansion with the emergence of new consumer needs based upon shifting demographic realities
- Displays an organization’s commitment to doing business, beyond consumerism, in diverse markets
- Showcases the company’s interest in and commitment to the economic growth of all communities
Supplier diversity is beneficial to all stakeholders, not just to the companies with programs. First and foremost, supplier diversity programming adds economic value because it encourages the growth of diverse businesses. Diverse businesses typically encounter barriers that challenge their start-up and sustainability, so effective supplier diversity strategies can alleviate these painpoints.
As small businesses grow, so will our nation’s economy. Since most diverse businesses are small businesses, they aid in the economic recovery and sustainability of their communities. In addition, supplier diversity is important because it provides products and services to emerging consumer markets. While traditional products and services remain available to consumers, demographic shifts create opportunities for diverse suppliers to meet the needs of emerging and/or shifting populations in the U.S. and across the globe.
Supplier diversity is also important because it assists the country in job creation. U.S. statistics show that nearly 50% of the U.S. workforce is employed by small business. In December 2014, the U.S. Small Business Administration reported 57 consecutive months of new jobs added back to the U.S. workforce after the worst recession in recent U.S. history. SBA Administrator, Maria Contreras-Sweet reports “…this new trajectory is attributable to the success of America’s entrepreneurs and the resurgence of our nation’s small businesses. About 7 million of the 10.9 million jobs added back were created not by large corporation, but by start ups and small enterprises.”
Supplier Diversity Thought Leadership
Thought leadership in supplier diversity is important because it provides a forum for sharing information, resources, tools, methodologies, and experiences to assist in the growth, expansion, and development of the industry. It is also important because it provides information to companies that are attempting to develop effective supplier diversity initiatives. As organizations share their experiences, they enable success within other organizations and in-turn build a stronger industry and stronger communities with stronger diverse businesses.
As the premier provider of supplier management services and solutions, CVM is positioned as a thought leader in the industry. We offer resources and solutions that enable supplier diversity success for our clients. Our team is comprised of supplier diversity leaders from the corporate, government, non-profit, and technology sectors. With over 400 years of combined supplier diversity experience, our solutions are designed to solve real-life supplier diversity challenges that can help our clients achieve their operational objectives.