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The Importance of Supplier Diversity in Business

Supplier Diversity
12th Sep 2023 | 10 Mins
The Importance of Supplier Diversity in Business


Supplier diversity has become a crucial part of corporate strategies in the quickly changing business environment of today. This strategy entails buying products and services from companies run and controlled by at least 51% members of historically underrepresented or underserved groups, including women, minorities, veterans, and others.

Beyond achieving diversity objectives, supplier diversity is important for supporting innovation, economic success, and a more inclusive society. Let's delve into the impact and importance of supplier diversity in greater detail.

Supplier Diversity Practices

I. What is Supplier Diversity?

Supplier diversity is a proactive business strategy aimed at creating equal opportunities for underrepresented groups in the supply chain. It involves actively seeking out and partnering with diverse suppliers to foster economic growth and social inclusion. This initiative emerged as a response to historical disadvantages faced by certain communities and aims to level the playing field for them in the business world.

The 1960s civil rights movements, which aimed to end discrimination in all walks of life, including business, was where the idea of supplier diversity first emerged. Companies can contribute to social transformation and economic empowerment by sourcing from and supporting minority-owned enterprises.

II. The Significance of Supplier Diversity and its Implementation Benefits

Recognizing the significance of supplier diversity goes beyond fulfilling corporate social responsibility. It serves as a catalyst for equity, inclusivity, and economic growth. Actively engaging diverse suppliers not only promotes economic opportunities but also uplifts marginalized communities. McKinsey's research suggests that boosting expenditure on Minority and Women Business Enterprises (MWBEs) from $1 trillion to $2 trillion could potentially generate an extra $280 billion in income and create four million jobs.

Moreover, supplier diversity injects innovation into the supply chain, introducing fresh perspectives and novel concepts. This infusion translates into higher-quality products and services at competitive prices, benefiting both businesses and consumers. In addition, supplier diversity enhances supply chain resilience, mitigating risks associated with overreliance on a single source.

III. Companies that embrace supplier diversity programs unlock a range of benefits:

Why should companies implement a supplier diversity program

Enhanced Brand Image and Reputation: Supplier diversity initiatives spotlight a company's dedication to social responsibility and inclusiveness, attracting customers, investors, and prospective employees who prioritize collaboration with socially conscious entities.

Access to Diverse Perspectives and Innovation: Engagement with diverse suppliers opens doors to partners brimming with unique viewpoints and innovative solutions. Such collaborations foster breakthroughs in products and services, conferring a competitive edge in the market.

Strengthened Community Relationships: The implementation of a supplier diversity program showcases a company's commitment to community investment, fostering deeper bonds with various stakeholders.

Improved Employee Engagement: A company's active support for social justice through procurement policies enhances employees' sense of connection to the organizational mission, fuelling passion in their work.

Enhanced Supply Chain Performance: Successful supplier diversity initiatives correlate with improved supply chain performance and overall business operations.

Notable companies like The Walt Disney Company and PepsiCo have witnessed heightened supply chain performance and gained competitive advantages through robust supplier diversity programs. Embracing supplier diversity equips companies to harness these benefits, positioning themselves as socially responsible leaders and catalyzing positive transformation in the business realm.

IV. Implementing a Supplier Diversity Program: Key Steps and Examples

Creating a successful supplier diversity program involves several strategic steps to ensure meaningful engagement and achieve diversity goals. Here's how you can implement an effective supplier diversity program:

Supplier Registration:

To kickstart your supplier diversity program, provide a user-friendly platform that enables suppliers to self-register. Tailor the registration process to capture essential diversity-related data. For instance, a client-branded module could allow suppliers to easily input information about their ownership status, certifications, and demographic details. This step simplifies onboarding while gathering crucial data for future engagement.

A real-world example is Dell's supplier diversity program, which offers an online portal for suppliers to self-register and provide necessary diversity information.

Data Scrubbing & Enrichment:

To fortify the precision and trustworthiness of your supplier diversity data, employ automated processes that streamline the Data Scrubbing & Enrichment phase. This involves the implementation of data scrubbing techniques, which validate and standardize supplier information, ensuring consistency and authenticity.

For instance, industry leader GE Appliances employs specialized data validation tools to elevate the caliber of their supplier diversity data. This meticulous approach not only refines the accuracy of supplier information but also ensures that diverse categories, such as Minority-Owned Business Enterprise (MBE), Women-Owned Business Enterprise (WBE), and Veteran-Owned Business (VOB), are meticulously validated and aligned with established criteria.

By adopting such techniques, companies are empowered to make well-informed decisions rooted in reliable and robust supplier diversity data, driving forward their commitment to inclusivity and equitable procurement practices.

Tier 2 Reporting:

Enhance transparency within your supply chain by implementing a system to track and report Tier 2 supplier spend data from prime suppliers. This involves both direct and indirect spending with diverse suppliers.

An example is Cisco's supplier diversity program, which requires its prime suppliers to report Tier 2 spending with diverse suppliers, contributing to increased visibility and accountability throughout the supply chain.

Tier 1 Analytics:

Integrate and analyze Tier 1 data from your ERP/AP systems to extract valuable insights from your main suppliers. This information guides strategic decision-making and bolsters your supply chain's diversity efforts.

For instance, AARP leverages data analytics to assess spending patterns and identify opportunities to increase spend with diverse suppliers.

Supplier Sourcing Locator:

Implement a robust search mechanism to identify and locate registered diverse suppliers. Consider integrating an external supplier database that aggregates information from various government and agency platforms.

A notable example is Salesforce's supplier diversity program, which offers a supplier portal with a comprehensive database of registered diverse suppliers.

Supplier Diversity Solutions

At VIVA USA Inc., we're committed to empowering your supplier diversity journey beyond technology – it's about driving meaningful change through your program.

In the journey to establish a successful supplier diversity program, every aspect matters. That's where STARS by VIVA USA Inc. comes in. Beyond the key modules mentioned earlier, STARS offers an array of additional features seamlessly integrated into our platform. This means you can focus on driving meaningful engagement and achieving diversity goals without searching further.

V. A Collaborative Approach to Supplier Diversity Success

These modules, working in harmony, form the essence of a Supplier Diversity Management program. Beyond mere processes, they embrace data accuracy, supplier engagement, regulatory compliance, and economic empowerment. By harnessing these modules, you stimulate innovation, nurture inclusivity, and drive positive transformations within your business and the communities you engage with.

Internally, this collaborative approach fosters cross-functional teamwork, encouraging departments to share insights and align strategies. During periods of economic uncertainty, such as a recession, this cohesive framework provides resilience by optimizing supplier relationships, identifying cost-saving opportunities, and maintaining a commitment to diversity even amidst challenges.

Moreover, establishing a consistent and meaningful collaboration with Supplier Diversity companies and certifying agencies offers a wellspring of insights. This ongoing partnership facilitates a deeper understanding of industry trends, best practices, and evolving regulations.

VI. DEI Movement: An Aligned Path to Inclusive Progress

The Supplier Diversity Management program completely resonates with the broader Diversity, Equity, and Inclusion (DEI) movement, reflecting a shared commitment to fostering fairness, representation, and societal advancement. Much like DEI initiatives strive to cultivate an inclusive and equitable workplace, the supplier diversity program advances economic empowerment and opportunities for historically marginalized suppliers. By extending the principles of diversity, equity, and inclusion to supplier relationships, businesses contribute to cultivating a fairer economic landscape, amplifying their impact, and solidifying their role as agents of positive change.

Supplier Diversity - Inclusive Business Collaboration

VII. Conclusion

In an increasingly interconnected world, supplier diversity has emerged as a pivotal business strategy. By sourcing from a diverse pool of suppliers, businesses can foster innovation, improve their brand image, and make a significant impact on local communities and the broader economy.

Moreover, supplier diversity yields a positive chain reaction, enhancing operational efficiency and value creation. It's more than supplier onboarding – it's an ongoing journey of engagement, partnership-building, and performance assessment, yielding enduring benefits for your business and the communities it touches.

Remember, implementing a successful supplier diversity program involves more than just onboarding diverse suppliers. It requires continuous engagement, building strong partnerships, and assessing supplier performance. Despite the potential challenges and obstacles, the long-term benefits—both for your business and the communities in which you operate—make it a worthy endeavour. At VIVA USA Inc., we're committed to helping you navigate this journey.

Supplier Diversity Management by VIVA

VIVA USA Inc. is at the forefront of providing comprehensive supplier diversity solutions. We stand at the forefront of supplier diversity solutions, offering a range of purpose-driven modules within our Supplier Diversity Management platform.

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Frequently Asked Questions

Supplier diversity promotes economic growth by creating economic opportunities for traditionally marginalized communities. By sourcing from diverse suppliers, companies inject capital and opportunities into these communities, leading to job creation, increased income, and improved livelihoods. According to studies, increasing spend on Minority and Women Business Enterprises (MWBEs) from $1 trillion to $2 trillion could generate an additional $280 billion in income and create four million jobs.

Leveraging this positive impact, VIVA USA Inc.'s comprehensive economic analysis report offers valuable insights, underpinning the correlation between supplier diversity and economic advancement. This analysis provides a holistic view, showcasing localized and broader economic growth throughout the supplier chain process, thereby reinforcing the far-reaching benefits of supplier diversity.

To start implementing a Supplier Diversity program, companies should first assess their current supplier base to identify opportunities for diversification. They can then establish clear diversity goals and policies, communicate these goals internally and externally, and actively seek certification from recognized diversity organizations to validate diverse suppliers. Companies should also create metrics to track progress and success in achieving supplier diversity targets.

Certifications play a crucial role in Supplier Diversity as they verify the authenticity of diverse businesses. They are provided by recognized certification organizations such as the National Minority Supplier Development Council (NMSDC) and Women's Business Enterprise National Council (WBENC). Certifications like Minority-Owned Business Enterprise (MBE), Women-Owned Business Enterprise (WBE), and others help companies ensure transparency and credibility when engaging with diverse suppliers.

Supplier diversity contributes to innovation and creativity by introducing diverse perspectives and experiences into the supply chain. Diverse suppliers often bring unique insights and solutions that may not have been considered within a homogenous supply base. This diversity of thought and experience fosters a culture of innovation, leading to the development of new and improved products and services.

Yes, Supplier Diversity can positively impact a company's bottom line in various ways. By sourcing from diverse suppliers, companies may gain access to cost-effective and innovative solutions, potentially leading to cost savings and improved efficiency. Additionally, a strong Supplier Diversity program can enhance a company's reputation and attract more customers who prioritize working with socially responsible and inclusive organizations.

Companies may face challenges when implementing Supplier Diversity programs, including difficulty finding qualified diverse suppliers in certain industries or regions, navigating the certification process, and integrating diverse suppliers into existing supply chain processes.

Convincing the company's higher echelons, including the C-Suite, of the Return on Investment (ROI) associated with these initiatives can be an additional obstacle. However, with strategic planning, comprehensive education, and robust support systems, these challenges can be effectively managed and navigated to achieve successful Supplier Diversity program implementation.

Yes, small and medium-sized businesses (SMBs) can benefit significantly from Supplier Diversity programs. Engaging with diverse suppliers allows SMBs to access new markets, expand their customer base, and gain a competitive edge. Additionally, Supplier Diversity programs can help SMBs build stronger relationships within their communities and enhance their brand reputation, attracting new opportunities for growth and collaboration.

Supplier Diversity plays a pivotal role in promoting inclusivity within society by providing opportunities for businesses from diverse backgrounds to engage in the economic landscape. This fosters economic empowerment and equal access, helping to dismantle barriers and reduce disparities. Moreover, Supplier Diversity's commitment to inclusiveness sends a strong message, encouraging other businesses to embrace diversity and contribute to a more equitable and harmonious society, in line with the broader principles of the Diversity, Equity, and Inclusion (DEI) movement.

To ensure long-term success with Supplier Diversity, companies should establish a clear strategy, set achievable diversity goals, and secure leadership commitment. Regularly assess and track progress, engage in ongoing supplier development and mentorship, and continuously communicate the value of Supplier Diversity across the organization. Partnering with experienced providers like VIVA USA Inc. can also provide valuable guidance and resources to navigate the journey effectively.

Technology plays a significant role in supporting Supplier Diversity efforts by providing tools and platforms to streamline supplier registration, data management, and reporting. Advanced software solutions, like VIVA USA Inc.'s Supplier Diversity Management platform (STARS), enable efficient tracking of diverse suppliers, simplification of data processes, and generation of insightful reports to monitor progress and make informed decisions.

Supplier Diversity aligns seamlessly with corporate social responsibility (CSR) initiatives by demonstrating a company's commitment to promoting diversity, equity, and inclusivity. By actively engaging with diverse suppliers, businesses showcase their dedication to social betterment, contribute to economic empowerment, and support marginalized communities. This commitment not only benefits the company's image but also positively impacts society at large.

Supplier Diversity contributes to workforce diversity and talent attraction by showcasing a company's commitment to a diverse and inclusive business environment. Companies that prioritize Supplier Diversity are more likely to attract and retain a diverse workforce that values working for an organization with strong ethical values. This alignment with diversity initiatives can enhance employee satisfaction, engagement, and overall workplace culture.