Solving the Biggest Challenges in Supplier Diversity

04/07/2021



(Source: Cytonn Photography on Unsplash)

The ethical and business cases for supplier diversity are already well-established. Developing a diverse supplier base can help organizations promote innovation through the introduction of new products and services, add resiliency and flexibility to the supply chain, and drive competition. It's also an important step in maintaining high ethical and moral standards.

But for many organizations, multiple challenges stand in the way of reaching their supplier diversity goals. Some of these challenges are operational and can be addressed with new solutions and processes, but others require individuals to change their behaviors.

Here are some of the biggest challenges to supplier diversity in 2021.

Defining What Constitutes a Diverse Supplier

Defining what makes a supplier diverse can sometimes be a challenge, even when some definitions are available and widely used by other organizations. Often, this definition must be handed down from leaders so that other members of the organization can use it in their day-to-day decision-making.

Without a clear definition, it can be difficult to reasonably track progress toward diversity goals and make informed decisions when looking for supply partners.

Many organizations trust in a standard definition that was reiterated by Harvard Business Review in 2020:

A diverse supplier is a business that is at least 51% owned and operated by an individual or group that is part of a traditionally underrepresented or underserved group. Common classifications are small-business enterprises (SBEs), minority-owned enterprises (MBEs), and women-owned enterprises (WBEs). Over time, the definition of diversity has expanded to businesses owned by other minority groups such as LGBQT, veterans, and proprietors with disabilities.

Going further, procurement professionals can analyze the steps a supplier has taken in their hiring and career development practices to promote diversity. These actions can then be weighed against other factors in determining viable supplier relationships.

Once the organization has an operating definition of what makes a supplier diverse, procurement teams will avoid confusion when making supplier selections. They'll also more effectively track their progress toward goals.

Establishing Concrete Supplier Diversity Responsibilities and Goals

Nonetheless, establishing concrete goals for supplier diversity is itself a significant challenge in some organizations. Ownership of diversity initiatives must also be established to ensure the program has accountability.

Supplier diversity commitments can represent a specific percentage of procurement spend or simply be a statement of responsibility that procurement professionals must adhere to. Procurement leaders and other decision-makers within the organization must come together to establish these goals, then ensure they are known by other employees.

For example, Wells Fargo explicitly states that it aspires to spend 15% of its procurement dollars with diverse suppliers. Similarly, JPMorgan Chase has set a benchmark for its diverse supplier spending, which totaled $10 billion in 2019.

Meanwhile, Coca-Cola has established a dedicated Supplier Diversity Department with a core set of responsibilities, including the responsibility to "identify and encourage departments to explore opportunities to identify small, minority-owned, women-owned, disadvantaged/disabled, veteran-owned and LGBTQA business enterprises to compete for business and from whom to

obtain goods and services whenever possible."

These are more than marketing statements. They are concrete standards that the company must adhere to. By documenting these goals and standards, these organizations can make a clear commitment to supplier diversity and hold themselves accountable for reaching their goals.

Overcoming Unconscious Bias

Although the issue of unconscious bias is certainly present in procurement, it's also a challenge for the entire organization. Embracing both the ethical imperative and the business benefits of diversity and inclusion is a good start, but that start must be followed by action.

Overcoming unintentional and unconscious bias requires organizations to engage in self-reflection and actively work to change biased behaviors around hiring, career development, and procurement.

According to Profiles in Diversity Journal, "Many unconscious biases are learned and internalized during childhood and early adulthood; family and community beliefs, media, school, and peer opinions can influence unconscious biases. Even if not based in malice, unconscious bias can lead to behaviors and actions that are deemed 'unfair,' and can ultimately negatively influence an organization's environment."

Addressing this challenge begins by recognizing unconscious bias both in oneself and in business processes, such as in selecting suppliers to partner with. Once unconscious bias is recognized, procurement teams can take steps to address it in their decision-making processes.

Integrating Supplier Diversity Programs into Relevant Departments

The ethical and business case for supplier diversity extends to all sectors of the organization, including any department and business unit that relies on suppliers for products and services. But some departments, like IT and procurement, have direct opportunities to address the challenges that stand in the way of achieving supplier diversity across the organization.

For example, IT procurement leaders have more procurement technologies at their fingertips than ever before, which creates opportunities to leverage these tools for supplier diversity initiatives.

Addressing this challenge starts with data. Using supplier intelligence solutions, procurement teams can obtain accurate data about potential suppliers, including whether each company is majority-owned by leaders from diverse backgrounds. This data can then be integrated into their decision-making to help them and other departments identify diverse suppliers when making decisions about partnerships.

This strategy can be applied across the procurement function for the procurement of technology and software, as well as for other products and services.

The ProcureCon IT Sourcing Virtual Event

IT procurement leaders play an important role in the organization's digital transformation, but they also have a role to play in how organizations acquire the IT solutions they use. By addressing these challenges, IT procurement professionals can connect with diverse suppliers of AI and automation solutions, analytics tools, mobile apps, and computing resources to help the organization meet its diversity goals.

Solving challenges for building diversity spend in IT procurement is set to be a hot topic at the next ProcureCon IT Sourcing Virtual Event, starting online on Tuesday, April 20, 2021, at 12:00 pm EST.

You can read the agenda and sign up for the event for free, right now.


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