Posted On:
As businesses strive to boost inclusion in this country, adopting a procurement strategy based on diversity becomes critical. Notably, the benefits of this approach transcend altruism, even though that also remains a worthy reason. Ultimately, partnering with diverse suppliers provides meaningful advantages to your company, no matter its size.
So let’s look more closely at the rewards your business enjoys when teaming with minority-owned businesses for procurement. Supplier diversity programs even offer the opportunity to support innovation and boost economic growth in areas truly needing it. In the end, it provides a significant opportunity to build a company culture able to attract and retain talent.
What is a Diverse Supplier?
Simply stated, diverse suppliers are a procurement business owned by a traditionally underserved or underrepresented group. These include minority-owned businesses as well as those owned by women. Small business enterprises sometimes receive this designation. In recent times, the definition of diversity expanded to include businesses owned by LGBQT minorities, veterans, and the disabled.
The civil rights movement of the 60s saw the genesis of the diverse supplier concept. General Motors and other American-based car manufacturers led the way in tandem with IBM and various electronics companies. The federal government eventually instituted a program providing encouragement to businesses to use minority-owned organizations for their procurement needs.
Why is Supplier Diversity Important?
Adopting a supplier diversity program remains important for a variety of reasons. Understand that many of these minority-owned businesses lack the economies of scale of their competition. As such, supporting the small business community increases competition, which helps reduce prices. In short, your company likely saves money on its supply chain spending as a result.
The stats prove a significant bonus exists for any company that focuses on adding diversity to its suppliers. A recent study revealed that businesses with diverse suppliers enjoy a 133% ROI compared to those without. It ultimately adds $3.6 million to a business’s balance sheet for every $1 million spent on procurement. Of course, these financial benefits dovetail nicely with the other advantages of a supplier diversity program discussed below.
What Does Being a Tier 1 Supplier Mean?
Basically, a tier 1 supplier manufactures and supplies the goods used in other products. If your company operates as a tier 1 supplier, it benefits from partnering with diverse tier 2 suppliers. This approach offers a great opportunity to support the cause and help these smaller minority-owned businesses thrive.
Additionally, by advertising a company culture focused on diversity, your customers understand working with you helps diverse small businesses. In short, it lets your client base support diversity through you and your tier-2 partners. The time-honored truism applies in this case: a rising tide lifts all boats.
Reasons a Supplier Diversity Program will Benefit Your Business
In addition to the financial benefits detailed earlier, a supplier diversity program also offers meaningful advantages to forward-thinking businesses. Let’s look at five of the most critical positives gleaned from this approach.
#1 Gain a Competitive Advantage with Diverse Suppliers
Once again, companies with a supplier diversity program enjoy a higher ROI compared to businesses with homogenous supply chains. Adopting this approach also drives competition among suppliers, helping to lower prices across your supply chain. It provides the means to extend your advantage over less altruistic competitors over time.
The changing demographics among your customer base also matter. Younger demographic cohorts, like millennials and Generation Z, increasingly champion diversity. Therefore, advertising your diverse culture as noted earlier helps attract these new customers to your business.
#2 Access a New Network
Somewhat related to that last point, championing a supplier diversity program as a tier 1 supplier expands your network. This strategy opens new markets to your business, helping to grow your customer base. It also provides an extra boost to your company’s networking efforts. A supply chain community thriving on diversity offers significant benefits to all parties.
#3 Supplier Diversity Raises Your Corporate Values
We previously highlighted how forging a company culture focused on diversity provides many tangible benefits to any business. Of course, this approach also applies to your company’s supply chain strategy. Simply put, supporting minority-owned businesses among your suppliers helps your local community thrive.
Beyond the other benefits to your business, raising your company values also attracts candidates interested in joining your company. Modern professionals increasingly want to work for diverse companies. In a competitive job market with strong demand and higher salaries, this makes your organization’s staffing process more effective. You also stand a better chance of retaining your current employees, ultimately saving costs.
#4 Working with Diverse Suppliers Benefits the Economy
As highlighted above, supporting minority-owned businesses in the supply chain helps these smaller companies thrive. This approach also supports the local and regional economies your business depends on for continued growth. The partnerships you forge with suppliers fosters supply chain resilience. Both diverse tier 1 and tier 2 suppliers greatly benefit from this tangible sense of community.
Additionally, you and your suppliers increasing support in the community ultimately promotes job creation. Over time, it creates a positive feedback loop helping businesses of all sizes thrive in this environment. Data from McKinsey highlights this truth. It notes that minority- and women-owned business enterprises (MWBEs) provide partners a yearly cost savings of 8.5 percent. This compares to the 3 to 7 percent annual savings gained by working with other suppliers.
#5 Minority-Owned Businesses Improve Innovation
In the end, working with minority-owned suppliers champions innovation. These small businesses remain the incubators of compelling new ideas. Their relative agility helps them innovate more easily compared to larger supply chain behemoths stuck in outdated ways. Partnering with these emerging companies helps your business truly enjoy the fruits of their ingenuity before your competition.
Anserteam is a Certified Women’s Business Enterprise
As a women-owned business and part of the WBENC-Certified national staffing alliance, Anserteam thrives on diversity. In fact, it lies at the heart of every action we take. We partner with other inclusion-focused staffing agencies to provide clients with the contingent workforce management solutions they need.
Schedule a meeting with us to discuss your business’s current and future hiring plans. We provide the know-how and business acumen to optimize your organization’s workforce.
