Diversity is critical in business, and many organizations are committed to maintaining diversity among internal team members. But what about external partners?
Supplier diversity is how businesses can continue empowering historically underrepresented groups and capturing new perspectives. Before we dive into the strategies for diversifying your supplier roster to improve business development, let’s clarify what we mean beyond the buzz of diversity.
What Is Supplier Diversity?
As the name suggests, supplier diversity is a method of strategically partnering with suppliers who represent minority groups or historically underrepresented communities. Being proactive in this area allows minority-owned businesses to grow and thrive, including suppliers run by women, veterans, people with disabilities, the LGBTQIA+ community, BIPOC-owned suppliers, and other marginalized groups.
Why Is Supplier Diversity Important?
Supplier diversity is essential for a variety of reasons. First, it allows minority suppliers to gain market share and expand their reach in your industry. Many minority-owned businesses are also small businesses, so your support is more tangible than it might be for a large corporation. Eventually, this support lifts the entire community through new job creation, wage increases, and higher tax revenue.
Businesses that maintain supplier diversity may also be better poised to connect with different audience demographics. Why? Supplier diversity heightens the benefits of early supplier involvement (ESI), a supply chain technique that fosters innovation by introducing novel perspectives early in the product development process. Inviting your supplier team to the table will widen your business lens and increase the potential for breakthroughs.
Additionally, one of the most significant benefits of implementing supplier diversity strategies for your business is the access it grants you to bid for large contracts — while improving your chances of winning those contracts. In fact, government organizations and corporations with a diversity supplier program require their vendors to show a percentage of their spending to be with minority-owned businesses. Some well-known corporations leading supplier diversity programs include Delta Air Lines, Coca-Cola, Toyota, and Walgreens, among many others.
The Diverse Supplier Definition
To be considered a “diverse supplier” by definition, a business must either maintain 51% ownership by one or more diverse people, hold HUBZone classification for businesses in economically disadvantaged communities, or hold classification as a small business.
If your business qualifies, check out this resource on receiving certification as a minority business owner.
Common types of diverse suppliers include small business enterprises (SBEs), minority-owned enterprises (MBEs), and women-owned business enterprises (WBEs). As of 2021, the US Census Bureau reported a total of 1.1 million minority-owned businesses, 1.2 million women-owned businesses, and over 330,000 veteran-owned businesses, so there’s no shortage of opportunities to commit to diverse partners.
Best Practices for Supplier Diversity Programs
If you’re ready to build out your supplier diversity program, here are a few best practices to keep in mind.
Know Your “Why”
When establishing a supplier diversity policy, it’s critical to understand why supplier diversity matters to you so your organization can communicate about it most effectively. What will your company achieve with this new initiative? How will your decision affect your suppliers and the community at large? Prospective customers (and prospective employees) will expect you to have an answer that goes beyond simply meeting consumer expectations, so give it some thought up-front.
Set Clear Expectations
Next, decide exactly how you plan to achieve supplier diversity. While most businesses aim to partner with suppliers from a variety of underrepresented groups, you may choose to begin with a narrower focus. Set expectations by indicating how you’ll balance the different diversity categories.
State Specific Goals
Lastly, it’s essential to clarify what “success” looks like for your supplier diversity program. Are you targeting a certain level of spend with diverse suppliers? Are you aiming to reach a certain number of diverse supplier partners? Most organizations will choose a quantitative metric to measure progress over time, but you’ll have to decide what to aim for in your organization.
Take the first step in establishing supplier diversity with Merritt Business Solutions! Learn more and get started with our team here.