Now more than ever there is a growing demand on corporations to demonstrate ethical compliance and social responsibility. As such, many organizations are actively working toward achieving greater supplier diversity – that is, developing and strengthening relationships with suppliers that include diverse business enterprises (DBEs).
To truly understand the importance of such diversity in the supply chain, we must first recognize where we are today. For example, according to the National Minority Supplier Development Council (NMSDC), in 2014, minority-owned businesses (MBEs) alone were responsible for creating 2.2 million jobs and contributed $49 billion in tax revenues.
Currently, MBEs account for at least 29 percent of all U.S. businesses. Furthermore, as the demographics of our country continue to shift, the U.S. Census Bureau predicts that by the year 2045 (or sooner), minorities will constitute more than half of the U.S. population.
Beyond this, the National Association of Women Business Owners (NAWBO) reports that there are more than 9.4 million firms owned by women, employing nearly 7.9 million people, and generating $1.5 trillion in sales as of 2015. As of 2013, there were 1.4 million LGBT-owned businesses in the U.S. and veteran-owned businesses total around 2.4 million, employing 5.8 million employees and doling out $210 billion in annual payroll.
Simply put, diverse-owned businesses are a major contributing factor to the United States’ economic health and a significant component of the country’s growth equation.
Yet, despite these encouraging numbers, achieving success as a diverse supplier still remains a challenge. This is due in large part to the fact that many DBEs still face obstacles that other non-minority owned businesses do not, particularly in terms of access to capital, education, networking opportunities and other resources – all assets that are necessary to remain competitive and fuel sustainable growth.
A forward-thinking, results-focused corporate supplier diversity strategy should focus on removing those obstacles, thereby providing DBEs with new and better opportunities to grow and succeed.
It involves taking a step back, examining the current state of your supplier relationships and identifying ways that your organization can not become more inclusive and actually assist DBEs in achieving their goals. In turn, these diverse suppliers will be better able to serve your company and you’ll have access to higher-quality products and services at competitive prices.
In other words, everybody wins.
What can your organization do to contribute to a more diverse supply chain?
Transparency is Key
Current trends indicate that transparency will become even more critical, particularly in terms of your company’s onboarding process. Sharing details on what specific products and services your company is looking to buy makes it easier for minority suppliers to identify how they can better support your needs. For example, Shell has an entire area of its website dedicated to helping small businesses figure out where they fit and learn how they can work with the company.
While, of course, it’s critical that a diverse business be clear about it’s value proposition and be able to succinctly articulate what problems they solve, it’s just as important for large companies and supplier diversity professionals to provide as much detail as possible on what types of diverse businesses they are looking to buy from, details about their company culture and insights on the company’s buying cycle for specific products and services.
This will help diverse business owners to better focus their limited time and resources toward developing relationships with the right companies for them and decrease the vetting time your team spends in onboarding new suppliers.
In addition to identifying more opportunities, companies can encourage greater supplier diversity by sharing success stories of how current suppliers were able to “get their foot in the door” and win business. It’s always inspiring to see the accomplishments of others and this can also help other DBEs to develop a more strategic roadmap for achieving similar successes.
Plus, this helps supplier diversity professionals to encourage their colleagues within the company to buy from diverse suppliers and support the procurement process.
Walgreens does just this on their corporate website, as does Purdue University. Following this lead will continue to demonstrate to both suppliers and enterprise corporations the benefits of working together.
Another area where trends will continue to shift in favor of DBEs, is enterprise-corporations providing meaningful networking opportunities. As mentioned previously, this is an area that has plagued diverse business owners and hindered ongoing growth for decades.
Tier 1 (a.k.a. “prime”) suppliers often have long-standing relationships and contracts in place with larger corporations. However, they often have mandates that state they have to sub-contract a certain amount of work to Tier 2 suppliers.
To address this, corporations can focus on strategically creating opportunities for prospective Tier 2 suppliers to meet and network with Tier 1 suppliers. This will make it easier for Tier 1 suppliers to meet qualified prospects they can sub-contract work to. Facilitating networking opportunities also makes it easier for prospective Tier 2 supplier to find out who the “Primes” are and gain the experience they need to compete successfully for contracts.
To create more productive networking opportunities for diverse suppliers, companies within specific industries can work together to host events like the Supplier Diversity Summit and the Diversity Alliance for Science (DA4S) Conference.
Lastly, organizations should invest in the development of supplier training programs which focus on such critical topics as how to build capacity, gain access to capital and become more “contract ready.” Oracle offers a web-based educational program that is designed to help diverse business owners navigate the supplier diversity qualification process. Similarly, Macy’s offers workshops and other valuable educational resources designed to help support minority and women-owned business initiatives.
Companies that pursue similar initiatives can and will help to not only promote the importance of supplier diversity, but provide actionable steps to help suppliers successfully win business. These companies will also find that they are able to source and connect with more high-quality suppliers and meet their spend goals more quickly and with much less effort.
As NMSDC President Joset Wright-Lacy so eloquently points out: “We cannot expect to have a truly robust economy unless everyone can participate. Putting people to work at good wages is good for what ails the American economy. Corporations that understand this macro-economic principle are figuring out ways to make sure MBEs have the opportunity to participate in job creation so people of color can participate in the economy.”
The future of supplier diversity extends far beyond simply creating a more inclusive environment in which all business owners have the same opportunities for success. By making a conscious effort to support DBEs, we will ultimately create a more robust supplier base that will fuel growth and strengthen the economy as a whole.