What is Supplier Diversity
The term Supplier Diversity refers to the proactive business program that promotes the purchasing of goods and services from previously underrepresented communities. These suppliers may include minority-owned, women owned, veteran owned, LGBT-owned, service disabled veteran owned, disabled-owned, and Small Business Administration (SBA)-defined small business concerns. The purpose of the business strategy is to help diversify specific corporate supply chains and help to reflect the demographics of the community in which a company is located in.
The belief is that the more a corporation buys from its local suppliers the more money is pumped into the local economy to help increase employment opportunities.
Supplier Diversity is especially key for the future of countries like America where, according to the US Census, minorities will be the majority population for US children by 2020.
History of Supplier Diversity
The history of Supplier Diversity spans from the Civil Rights movement in the 1960s to today’s expansion into supplier ROI. After the Civil Righs Act of 1964 which expanded federal contracting opportunities to minorities, in 1967 President Johnson’s Executive Order 11246 allowed affirmative action discrimination protections to include contracting opportunities for women as well.
The biggest growth for the future of Supplier Diversity came under the Nixon administration when, in 1969, President Nixon established the Office of Minority Business Enterprise under E.O. 11625 (which would later become the Minority Business Development Agency in 1979). In addition to the creation of the the federal office, the E.O. required government agencies to contract with minority-owned businesses and track the information based on previously established goals.
Contracting with minority owned businesses within the private sector grew after the creation of the National Minority Supplier Development Council in 1972. The organization saw huge growth in the 1990s and early 2000s with private corporate supplier diversity programs growing to include purchasing managers and directors.
Today organizations have expanded on the definition of diverse / minority owned business including LGBT, disabled, and veterans. This expansion has also pushed corporations to connect supplier diversity to more direct buying impacts including corporate investments, internal purchasing strategies, and economic growth opportunities.
The Business Case for Supplier Diversity is sometimes misunderstood as simply a socially good or morally right thing to do. While buying from under represented groups is a good thing to do, there are other benefits as well. For Supplier Diversity, the largest support of the industry is the changing demographics. Currently the fastest growing populations in America are also the least wealthy and most under paid. Women are paid around 80 cents for every dollar men are paid and “in 2016, white families had a median net worth of $171,000, compared with $17,600 for blacks and $20,700 for Hispanics.” If growing American communities are not supported, this will inevitably decrease the wealth of Americans as a whole and increase the already growing wealth gap by even high percentages. When communities are able to establish businesses, own assets and employee their neighbors, wealth is easily distributed.
In addition to the support of ethnic and gender groups. local business advancement is also necessary. Right after the recession, cities where local suppliers were waning saw the biggest loss of population and external investment. Buying locally is extremely important for corporations in an effort to support the city they are located in, creating an innovative brand of a company situated in a “prosperous” city. This also helps in the recruiting and retaining of talent in today’s employment market where Millennial job seekers look for a company that they can connect with on a personal level.
How to Implement a Supplier Diversity Program
Most large corporations have a Supplier Diversity program in some capacity. This can range from a supplier diversity department with several employees whose sole purpose is to recruit and purchase from Diverse Suppliers, to responsibilities being distributed among one or several positions. In general, a company’s effectiveness steams from the internal support of the executive leadership. Like most things in a company, the less leadership pushes a supplier diversity agenda, the less effective it will be.
To establish a successful program, leadership must lead the way. Once buy in is achieved, creating a set agenda marked with goals over a set period of time is necessary to track the success of your program. A program like Supplier Diversity without any goals or metrics to measure will not be effective in most cases. Metrics can include amount of conferences visited, amount of suppliers connected with, purchasing dollars spent, and suppliers purchased from. These goals can be furthered extended to internal purchasing and facility departments as well as connected to corporate contracts.
Once metrics have been established, appointing key personnel to be responsible for achieving the agreed upon goals is mandatory. Whatever a company’s resources entail, a clear person or people responsible for supplier diversity must be instituted to ensure movement. Once responsibilities have been handed out, a reporting structure must be mandated and include leadership feedback. Consistent goal updates as well as open communication as the foundations of creating and maintaining a successful Supplier Diversity program.
The growth of the program will not happen over night and may take years to run properly, but if a good foundation is created at the beginning, then growth will come quickly.
Supplier Diversity is an important business program that can help to improve both the surrounding community and setup a corporation for future success within a changing demographic.
The explanations given in this Introduction were meant to be short and give the reader a basic understanding of the industry and its overall purpose. If you have any questions on the content, please leave us a note or Contact Us Today