Supply Excellence — Supplier Diversity: It’s Time to Get Started

Supplier Diversity: It’s Time to Get Started

December 19th, 2007 · by Tim Minahan · 1 Comment · automotive sector, enviro/social sustainability, supplier management, supply management

For many companies, supplier diversity has been like New Year’s resolutions: we have the best intentions of doing them, but typically fail to as other initiatives get in the way.

Sure certain industries like Aerospace and Defense have been pushing diversity programs for decades, but their initial motivation was largely government mandates. Automakers and retailers initially jumped on the supplier diversity bandwagon as a way to demonstrate their commitment to their core customer segments.

However, along the way, companies ranging from Boeing to Toyota have found that supplier diversity can yield some significant benefits in the areas of innovation, supply security, and competition. The problem with supply management teams reluctant to jump on board sometimes lies with the perception of it working against broader objectives of cost cutting and consolidating supply bases.

In November’s Supply & Demand Chain Executive, Raj Sharma, founder, president and CEO of Censeo Consulting Group, wrote about on three drivers that strengthen the case for supplier diversity: demographic shifts in the U.S. population, the need for compliance with small business goals and alignment with broader supply management goals.

Demographic Shift- changing demographics have lead to an increase in the number of minority-owned businesses. From 1997-2002, the number of woman-owned businesses increase 19.8 percent. Contrary to belief, Sharma explains that minority-owned businesses generally provide commoditized products and services with a large portion in the professional, scientific and technical fields. A diverse supply chain can become a great “selling” point to local and community leaders of various ethnic groups.
Compliance with small business goals- government purchasing rose above $400B last year so small business compliance has become a necessity for companies serving the government or looking to enter the government market. Innovative programs that lead to compliance with government small business goals can become a source of competitive advantage and new business. The same goes for the increasing trend of Fortune 500 supplier diversity goals.
Alignment with supply management objectives – small and diverse businesses typically have lower cost structures, Sharma explains. Larger companies often embrace small companies with large potential, investing in them to help them realize their full potential.

With a strong internal commitment to supplier diversity, Sharma concludes, successful companies are building a new type of competitive advantage that will enable them to more effectively leverage the value of a diverse supply base. Once again, your supply strategy has a direct impact on your company’s brand and competitive advantage in the marketplace. What are you waiting for?

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