Diversity and inclusion is a topic of growing importance to both consumers and brands, especially considering the increased societal focus on equity and race. Brands are increasingly unveiling initiatives to make progress with diversity and inclusion across their businesses, communities, and supply chains. It is therefore more important than ever, for brands to achieve diversity and inclusion in the supplier base and this blog will discuss not only why it is important, but also the best ways that brands can position themselves to achieve diversity and inclusion within their supply chains.
What is a diverse supplier?
A diverse supplier is a business that is at least 51% owned and operated by an individual or group that is traditionally underrepresented or underserved grouped. The goal of supplier diversity programs is to encourage the use of minority-owned, women-owned, LGBT-owned, or disabled-veteran-owned suppliers, as well as historically underutilized and small businesses.
The benefits of a diverse and ethical supply chain
Due to an increasingly diverse global population, not only are minority audiences becoming a larger target for companies, but minority-run businesses are comprising a larger portion of the small business sector. Brands need to be making inclusive supply chains a priority for a variety of reasons, ranging from social responsibility to the bottom line. A well thought out and executed diversity programme will combine the desire for a better, more equitable world but also help drive brands to be a competitive leader in the marketplace. At the end of the day, more diverse and ethical supply chain practices can be key attractors for your consumer base.
The Hackett Group’s Supplier Diversity Study found that companies who dedicate 20% or more of their spend to diverse suppliers can attribute as much as 15% of their annual sales to supplier diversity programs. Depending on annual sales numbers, previous studies have put the return on investment (ROI) of a supplier diversity program as high as 133%. An example of an organization achieving results from their diversity programme was when Walmart sourced almost $250 million internationally from women-owned businesses in 2016 through its Women’s Economic Empowerment initiative.
Supplier COLLABORATION is integral to any diversity and inclusion strategy
Supplier collaboration is a key aspect that needs to be considered when bringing diversity and inclusion to supply chains. To achieve this, brands need to focus on a few key areas within their engagement plans, because if they can expand their network and engage well with suppliers, the solutions found have a higher chance of being unique and executable.
The four key areas to consider are:
1) Quality
All brands have standards of quality to uphold in their products and services. Those standards require a certain level of quality from your suppliers. Test diverse suppliers at the same level you would any other to ensure they are meeting your quality standards.
2) Capacity
Good suppliers know their limits and make promises accordingly. Can they meet your needs logistically? Are they able to scale to produce the quantities you need? Because these suppliers are usually small businesses, they may not be capable of producing goods or services at the level your company needs. If this is the case, look for Tier 2 opportunities that are a better match for their capabilities.
3) Location
Location impacts cost and availability. Depending on your needs and the capabilities of diverse suppliers in your geographic region, partnering with a more local company can keep shipping costs down and speed up delivery.
4) Consider Risk / Certifications
Forming new partnerships always involves risk and should be considered carefully. In the case of diverse suppliers, be sure you have up-to-date financials as well as current references, certifications (as a diverse supplier and any industry accreditation), insurance and liability coverage, and capability statements.
Investing in a supplier diversity programme presents many opportunities
Creating a supplier diversity programme may be a daunting prospect in the short term but investing in a programme and working towards a more diverse chain presents many opportunities for brands to not only join the fight against discrimination against minority groups but it also stimulates economic growth and enhance your business.
At S4RB we have worked collaboratively with many brands to help them implement and grow their supplier diversity programmes. We have the expertise to help you understand how your suppliers can be supported and nurtured to improve their capabilities. We offer resources and solutions that enable you to drive change and enable supplier diversity success.
