Reach Larger Corporate Objectives with Supplier Diversity
As companies increasingly start to implement supplier diversity goals, such as setting an annual percentage of spend with women-owned, minority-owned and veteran-owned businesses, it’s important to remember that there isn’t necessarily a magic number that automatically defines success. Not every company moves at the same pace, and many will differ in their commitment to supplier diversity.
That said, the more that you can do to grow your supplier diversity spend and reach your supplier diversity objectives, generally, the more likely you can reach larger corporate objectives too. So rather than just adding a minority supplier or two for the sake of it, focus on the benefits of diversity, and link supplier diversity efforts with broader corporate goals.
And while supplier diversity efforts may seem less pressing during this global health crisis, the reality is that some employees may have more time on their hands than they have in the past. So as a silver lining, this could be a good opportunity to work on a strategy for improving supplier diversity.
Linking Supplier Diversity With Innovation
When at least 20% of a company’s managers are women, a company’s level of innovation increases substantially, according to a Boston Consulting Group (BCG) study.
A similar effect can be found when companies make a commitment to meeting their supplier diversity objectives in order to bring in new perspectives and new types of products and services that can take a company beyond its current capabilities.
As the BCG study found, however, diversity on its own only means so much. Companies that take steps such as making diversity a strategic priority, encouraging communication of differing ideas and allowing employees’ to genuinely contribute to corporate decisions can improve innovation.
With supplier diversity, similar efforts need to be made. For example, if one of a retail company’s goals is to launch innovative new products, simply shifting spend to a diverse vendor might not change much. Yet building relationships with diverse vendors who can learn what you’re looking for and introduce you to new items can help you get there. In some cases, forming strong relationships with diverse vendors can also help you find new vendors to fill niche needs, as you may not otherwise have exposure to certain networks.
Improving Supplier Diversity to Expand Your Customer Base
Meeting your supplier diversity objectives can also help you meet larger corporate objectives, such as expanding the size of your customer base, which can be related to innovation. For example, when expanding into new geographic areas, diverse vendors whose founders are from those markets may be able to offer products, services and insights that can help you serve customers in those new areas.
Diverse vendors can also help you grow your customer base when you link supplier diversity efforts with sales and marketing efforts. For example, Walmart highlights products that come from diverse suppliers on its website, which makes it easy for customers who care about supporting these businesses to purchase from them.
Companies that make a commitment to supplier diversity can also incorporate these efforts into their marketing as a way to differentiate from competitors. For example, companies can create social media content highlighting the diverse vendors they work with, such as sharing stories about women and minorities who started businesses. Doing so can make a difference considering that consumers are more likely to cite social responsibility rather than price as being among the most important attributes of companies, according to a Clutch study.
Are Your Supplier Diversity Efforts on Track?
In order to meet these larger strategic goals like being more innovative and reaching new customer segments, companies should prioritize supplier diversity efforts. However, doing so can be easier said than done. In many cases, businesses need to expand their pool of suppliers, adjust procurement processes, improve internal awareness of supplier diversity efforts and more.
To learn more about how your business can meet your supplier diversity goals, download our checklist: A Guide to Fostering Diversity Through Procurement.