Creating an Effective Supplier Diversity Program
Many procurement organizations are now pursuing supplier diversity. A "diverse supplier,” is typically one that is at least 51% owned and operated by an individual or group that has been traditionally underrepresented.
The push has been driven in part by ESG programs, but there are clear business benefits to supplier diversity as well.
According to Harvard Business Review, the commercial benefits include a widening pool of potential suppliers, more competition amongst suppliers, and better prospects for new hires. In addition to the commercial benefits, "Supplier diversity programs can be part of a company’s efforts to maintain high moral and ethical standards.” They can also deliver "broader societal benefits by generating economic opportunity for disadvantaged communities.”
Here, we’ll explore the "dos and don’ts” of creating an effective supplier diversity program.
Create a Formal Program with Clear Objectives
Before creating a supplier diversity program, it is important to define clear objectives and establish a formal structure.
Start by determining the goals of your program. Do you want to increase the number of diverse suppliers? Or do you want to ensure that a certain percentage of all procurement spending goes toward diverse suppliers?
These objectives should be part of an overarching supplier diversity policy. This policy should include a description of your program, the objectives, and specific criteria for determining which suppliers are considered diverse.
It can also be helpful to appoint a leader responsible for overseeing the supplier diversity program. This individual should have the authority to enforce the policy and evaluate progress toward stated goals, and they should act as a champion for the program in acquiring resources and support.
Obtain Sponsorship from Stakeholders
Once you have created a formal program, it’s important to obtain sponsorship from all key stakeholders—including procurement leaders, members of the C-suite, and other senior executives.
These individuals should be willing to invest resources in the program and champion its success. Without their support, it will be difficult to launch a successful supplier program.
Naturally, you'll need to obtain buy-in from across your procurement operation. To successfully implement the program, all procurement teams must understand the objectives and be committed to meeting them.
Find Qualified Suppliers
Your supplier diversity program won’t be effective without qualified suppliers. To find them, you’ll need to do some research.
Start by looking at national and regional organizations that provide directories of certified diverse suppliers. You can also join associations such as the National Minority Supplier Development Council or attend industry events specifically designed to connect buyers and suppliers.
You can also foster relationships with local communities, as well as global communities in areas where your supplies are produced. These efforts can help you to identify potential suppliers and ensure that you are working with qualified, ethical partners.
Finally, ensure that your organization is seen as a supportive and welcoming environment for diverse suppliers. It’s important to be open and transparent about opportunities, provide feedback on performance, and treat all vendors fairly.
Establish a System to Track Supplier Diversity Efforts
Set up processes to measure the success of your program, such as tracking the number of diverse suppliers and the amount of procurement spending going toward them. This will help you understand the progress being made—and what areas need improvement.
You should also create a system for tracking supplier utilization and performance. This will ensure that you’re engaging with the most qualified suppliers and getting the best value for your money.
Review progress on an ongoing basis. Use this data to identify any gaps in your program—and to determine what needs to be done to meet stated objectives.
What to Avoid in Your Supplier Diversity Program
While pursuing your initiative, be aware of common pitfalls in supplier diversity programs so you can avoid them.
Some common challenges to supplier diversity programs include:
- Underestimating the resources needed to manage the program
- Focusing too much on short-term goals
- Getting complacent about supplier diversity efforts
- Mis-identifying suppliers as diverse
By keeping these pitfalls in mind, you can ensure that your supplier diversity program is a success.
Learn More at ProcureCon Indirect East
Supplier diversity is set to be a hot topic at the next ProcureCon event.
To learn more about supplier diversity, don’t miss ProcureCon Indirect East, happening from September 11th through 13th at the JW Marriott Orlando Bonnet Creek Resort & Spa. Download the agenda and register today.